Amazon’s bet on satellites is expensive and faces fierce competition. It also just might work

Amazon is making a big move to advance its ambitions in outer space — one that is pricey and pits it against a formidable incumbent. It could also end up a huge winner for the e-commerce and cloud giant. The Seattle-based company said this month it plans to acquire satellite operator Globalstar for $90 per share in a cash-and-stock deal worth about $11.6 billion. The deal, expected to close in 2027, will bolster Amazon's budding internet-from-space service called Amazon Leo, which is slated to begin commercial broadband service in mid-2026. It also helps Leo's standing against the dominant player in the satellite internet space, SpaceX, led by Elon Musk. The move reinforces Amazon's commitment to the expensive and extensive task of building out a satellite internet service — a pursuit that, for years, has given some investors pause as they questioned the price tag and the time to reap the rewards. It used to be called Project Kuiper and originated in 2019 when Amazon founder Jeff Bezos was still CEO. Leo has the potential to "be a huge business out of nowhere," Jim Cramer said in reaction to the Globalstar deal. "It's a sudden pillar. This will be something that we're going to be talking about." He added, "It flips from being something that [makes you say] I'm tired of hearing the losses, to I think it's going to be big gains here." Globalstar will be the second-largest acquisition in Amazon's history, behind Whole Foods, for $13.7 billion in 2017 . On its face, spending almost $12 billion on a company projected to bring in less than $300 million in revenue this year seems like an expensive purchase. Whole Foods booked $16 billion in sales in its fiscal 2017. Plus, the acquisition comes at a time when Amazon is already spending heavily on AI-related buildouts, which will likely result in negative free cash flow in 2026. This comes after Amazon's free cash flow fell 71% in 2025 to $11.2 billion. The strategic rationale is there, however. In defending the Globalstar deal, Morgan Stanley said its size is small relative to Amazon's large capex, and analysts argued the tie-up has "applications to AMZN's broader business down the road, such as providing connectivity for warehouse automation, drones, and more." Indeed, Leo's importance to Amazon goes far beyond its own eventual revenue stream — valuable as that may become. For a company projected to do roughly $800 billion in revenue this year, it takes a lot to move the needle. It is Leo's potential to also strengthen Amazon's retail and cloud businesses that justifies its prior commitment to invest at least $10 billion in the project . Now, it is what justifies buying Globalstar. AMZN 1Y mountain Amazon's stock performance over the past 12 months. A closer look at Globalstar Globalstar operates low Earth orbit (LEO) satellites connecting more than 120 countries, and it holds wireless spectrum licenses across the globe. Notably, Globalstar is also Apple's technology partner for the iPhone maker's emergency satellite texting and "Find My" device services. Apple and Amazon agreed to continue that relationship and collaborate on future Leo services. Globalstar currently has about 24 satellites in space, with agreements to acquire and deploy roughly 50 new satellites from Canada's MDA Space . Globalstar's fleet would add to the 240 satellites that Amazon has launched into LEO since last April. Amazon has secured approval from the Federal Communications Commission to launch roughly 7,700 satellites in the coming years. The company was supposed to have 1,600 of them in the sky by July to meet an FCC mandate. In January, Amazon filed for a 24-month extension. Globalstar's arguably most coveted asset, though, is its ownership of spectrum licenses. Spectrum is the highway that enables wireless communication. But it is a finite, naturally occurring resource, so it's carefully managed worldwide by regulators to ensure the traffic moves smoothly and signals don't pile up. Licenses are therefore required to "drive" on it. Globalstar's licenses are key to operating what's known as direct-to-device (D2D) services, which allow regular smartphones and other devices to connect directly to satellites — no need to go through cell towers first or attach special hardware. This helps fill in the gaps in rural areas without traditional cellular coverage. The Globalstar-Apple partnership is an example of D2D services. The reason this matters: When Amazon Leo begins its planned commercial service this year, it will start by offering broadband internet to homes, businesses, and government entities. Amazon plans to roll out a next-generation D2D satellite system starting in 2028 to deliver voice, data, and messaging services directly to mobile phones, integrated with its broadband systems. Owning Globalstar "enables faster deployment of D2D connectivity at scale—reaching areas where terrestrial deployment is delayed, cost-prohibitive, or vulnerable to disruption," Amazon said in a press release. With Globalstar's licenses, Amazon can launch its D2D network "without being entirely reliant" on mobile network operator partnerships for spectrum, Morgan Stanley noted. Verizon , AT & T , and T-Mobile are the dominant mobile network operators in the U.S. Deutsche Telekom, Swisscom, and Vodafone are among the European players. This helps close the wide gap between Leo and SpaceX's Starlink, which has an industry-leading position with more than 10,000 satellites in orbit and over 10 million users . SpaceX is targeting a blockbuster initial public offering in late June. Musk-owned SpaceX started with a Starlink broadband offering before taking steps in recent years to expand into D2D service. As part of that push, SpaceX in September announced a $17 billion deal to buy wireless spectrum licenses from EchoStar , the parent company of Dish TV and Boost Mobile. SpaceX has also partnered with T-Mobile to access spectrum. Wall Street firm Citizens estimated Starlink's annual revenue at $10 billion to $11 billion, assuming $90 in monthly revenue from 10 million subscribers. It also said Starlink appears to be highly profitable. "Importantly, the opportunity is huge and can support multiple players, despite Amazon's late entrance, as PWC estimates that consumers spend $799B globally on mobile telecom services, which grows to $1.2B when including fixed broadband and fixed voice services," Citizen analysts wrote to clients last week. Citizens has a market perform rating on Amazon and a price target of $315 on the stock. AST SpaceMobile — in the news last week due to a satellite deployment mishap with Bezos' privately held rocket company Blue Origin — is another player in the D2D service. AT & T and Verizon are working with AST to offer cellular service from space. How Leo will strengthen Amazon The complement of broadband and D2D services will help Leo reach its full potential, as far as both consumers and investors are concerned. In his recent annual letter to shareholders , Amazon CEO Andy Jassy discussed Amazon's satellite internet ambitions, highlighting the scale of the opportunity of expanding access to high-speed internet for the billions around the globe who don't have it. "If you don't have broadband connectivity, you can't engage in many of the digital activities," Jassy wrote. Amazon Leo already has "meaningful revenue commitments" both from government and enterprises, Jassy added. Delta Air Lines chose Leo for future Wi-Fi starting in 500 planes in 2028. Other committed Leo customers include JetBlue, AT & T, Vodafone, DIRECTV Latin America, and NASA. Of course, if the Globalstar deal gets approved by regulators, Apple is poised to join that list, too. A key advantage for Leo in the commercial and government market is the existing customer base of Amazon Web Services, which is easily the world's largest cloud computing service by revenue. All the companies that rely on AWS for some of their computing needs are natural potential customers for Leo. "The sales motion for Leo into those accounts is substantially easier than it would be for a standalone operator," analysts at William Blair wrote in a note to clients this week. "Early wins already illustrate the traction Amazon is getting in the enterprise segment, even though its service is not even commercially available yet. In contrast, Starlink has had to build its enterprise motion essentially from scratch, and to date its strongest traction is in consumer, not traditional enterprise." William Blair estimated the enterprise opportunity at roughly $100 billion. "Enterprise customers can move data from a remote site directly to their AWS workloads through Amazon Leo seamlessly," wrote the firm's analysts, who have an outperform rating on Amazon's stock. This illustrates how Leo could strengthen the attractiveness of AWS, which is already the company's profit engine. To attract consumers, Amazon could offer Leo's connectivity services bundled with Prime, which has more than 200 million members worldwide. At the same time, Leo could expand the pool of potential Prime users. Consider someone in a rural area who eventually has reliable internet service thanks to Leo. That theoretically makes Prime Video more exciting to them. This dovetails with Amazon's recent efforts to bolster its delivery capabilities to rural communities . William Blair also highlighted Leo's broad range of internal use cases at Amazon, particularly across its fulfillment and logistics network. Analysts believe Leo's connectivity could be useful for Amazon's delivery vehicles in rural areas with limited cellular coverage. They said Leo could also serve as a primary or backup connectivity at Amazon's fulfillment centers and grocery stores, which could "potentially drive cost savings and margin expansion across its businesses." The firm further noted growth opportunities with Prime Air, Amazon's drone delivery service, in areas where access to ground delivery may be more challenging. The bottom line Amazon is still far away from realizing its full space ambitions, and doing so will likely require much more funding in the future. But buying Globalstar is a smart move that underscores the company's commitment to satellite connectivity, which will keep the Amazon flywheel humming in the coming years. We continue to maintain our 1-rating on Amazon and a $250 price target on the stock. Amazon reports first-quarter results Wednesday night. 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