Space Companies' Survival Depends on Military Contracts

CNBC's Investing in Space newsletter provides a comprehensive look at the business of space exploration and privatization. Michael Sheetz, CNBC's reporter, covers the latest news, investor updates, and exclusive interviews on the most significant companies in the space industry. Subscribe to receive future editions.

Overview: The rockets' unavoidable glare

This week, as Americans commemorate our freedom, I am reminded of the overlooked connection between space and our national security.

When most people outside the industry hear "space" or think about "investing in space," they associate it with science, exploration, astronauts, and possibly Hollywood-influenced depictions of spacecraft.

Since its inception, space has been viewed as a "warfighting domain" by the Pentagon. The first rockets, satellites, and even the Apollo architecture were developed by the military and its aerospace contractors. Despite being younger than NASA, which is over 50 years old, the U.S. Space Force already has a larger annual budget than the latter, which is highly respected and beloved among the public.

Astronauts in the NASA corps are as likely to have "combat flight hours logged" on their resumes as any other qualification.

Historically, the largest space contracts have been won by the biggest defense contractors, and this trend continues today with SpaceX earning a coveted spot for the military, whether it's launching rockets for Space Force or building satellites for the NRO.

The majority of revenue for top pure-play space companies comes from military work under contracts from the U.S. and its allies. These military space deals often represent "we made it" moments for companies, as CEO Peter Beck of a company that recently won a seat in the $10 billion PWSA Sweepstakes told me earlier this year.

At the time, Beck stated that this was our company's first foray into the world of being a defense prime, and it doubled our backlog overnight with just one contract.

As venture capital becomes more interested in startups that are successful in early military deals, the importance of military contracts is increasing further upstream.

Space-based capabilities are crucial to the world's militaries, including the U.S. and its adversaries, as demonstrated by global conflicts such as Russia's invasion of Ukraine and the tensions between China and Taiwan.

As you enjoy hotdogs and watch fireworks on the Fourth of July, consider the significance of space to the military and how seemingly unrelated parts of the cosmos contribute to what happens on Earth.

What's up

• NASA and Boeing are postponing Starliner's return by 'weeks' for additional thruster testing, the agency and company announced. No new target date has been set, and they plan to wait until completing a test campaign of the spacecraft's thruster technology at White Sands, New Mexico. – CNBC
• The risk of space debris reaching the ground was underestimated by SpaceX and NASA, as multiple incidents of debris surviving reentry underscore the need to reevaluate the "survivability" of spacecraft components.
• During a booster static fire test of its Tianlong-3 rocket, Space Pioneer accidentally launched a Falcon 9-sized rocket, which flew for about a minute before impacting back on the ground in a fireball.
• NASA has announced that SpaceX will use a Dragon-based design for the U.S. Deorbit Vehicle, with some modifications and changes required to the trunk for the spacecraft to guide the ISS through reentry.
• According to reports, Japanese billionaire Yusaku Maezawa's canceled Starship contract was worth $500 million, but it is said that he did not pay the full amount before cancelling the dearMoon lunar trip.
• Kuiper commercial launches have been delayed to Q4, shifting from the first half of this year. – Via Satellite
• According to a report, Europe is significantly behind the U.S. in venture funding for space startups, and a survey by the EU's lending arm indicates that VC investors in the region have a pessimistic outlook on fundraising.
• After spending 378 days in the habitat at NASA's Johnson center in Houston, the Mars simulator crew is now leaving the confines of their environment.
• The Space Exploration and Research Agency (SERA) has purchased a future New Shepard flight and will hold a public competition for the six seats, the group announced.

Industry maneuvers

• NASA received a $69 million contract from SpaceX to launch the COSI telescope in August 2027 on a Falcon 9 rocket. COSI is a wide-field gamma-ray telescope.
• The Space Systems Command (SSC) has included Blue Origin and Stoke in the OSP-4 launch program, which features a diverse range of rocket companies competing for contracts for experimental or small payload missions. – Space Force
• PLD Space is offering free satellite rides on the first two launches under its MIURA 5 Spark Programme. The company announced that organizations with small satellites can submit bids to launch the two MIURA 5 rocket demonstration flights in 2025 and 2026, with "standard launch services at no cost."

Market movers

• Virgin Galactic regained NYSE listing compliance after completing a 1-for-20 reverse stock split last month.
• The six directors of the company issued secured notes worth $500,000, which were intended to be used first for the payment of earned employee retention payments.
• The OHB-built German spy satellites experienced a malfunction: Two OHB satellites intended for the SARah network were unable to deploy their antennas, and the German military has stated that OHB will be responsible for constructing two replacement satellites. – Ars Technica

Boldly going

• Michael Pavloff has been appointed as Deputy CTO at Aerospacelab, having previously served as VP of Technology at Terran Orbital.
• Lunasonde welcomes retired Air Force general and NASA Advisory Council member, Lee Levy, to its advisory board.
• NASA has designated Andre Douglas as an Artemis II backup astronaut. He will assume this role if one of the mission's primary crew members is unable to fly. Douglas completed his astronaut training program in March.

On the horizon

• July 4: Firefly Alpha launches NASA VCLS demo mission from California.
• July 7: SpaceX Falcon 9 launches Starlink satellites from California.
• July 7: SpaceX Falcon 9 launches Turksat 6A satellite from Florida.
• July 9: Arianespace Ariane 6 launches inaugural flight from French Guiana.
• On July 10, NASA's Starliner astronauts will conduct a press conference from the International Space Station.