Amazon is making a significant, albeit expensive, play to advance its ambitions in outer space, setting the stage for a high-stakes competition against established players and potentially securing a monumental win for the e-commerce and cloud giant. The Seattle-based company announced this month its intention to acquire satellite operator Globalstar in a cash-and-stock deal valued at approximately $11.6 billion, at $90 per share. This acquisition, anticipated to finalize in 2027, is poised to significantly bolster Amazon’s nascent internet-from-space initiative, dubbed Amazon Leo, which is slated to commence commercial broadband services by mid-2026. Furthermore, it directly confronts the dominant force in the satellite internet arena, Elon Musk’s SpaceX.
This strategic maneuver underscores Amazon’s unwavering commitment to the capital-intensive and complex undertaking of building out a satellite internet service. For years, this endeavor has prompted investor scrutiny, with concerns revolving around the substantial upfront costs and the timeline for realizing returns. Originally known as Project Kuiper and initiated in 2019 during Jeff Bezos’s tenure as CEO, Leo is now envisioned by observers like Jim Cramer as a business poised to emerge “out of nowhere” and become a “sudden pillar” worth discussing. He noted a potential shift from “tired of hearing the losses” to anticipating “big gains here.”
The Globalstar acquisition marks Amazon’s second-largest purchase in its history, trailing only its 2017 acquisition of Whole Foods for $13.7 billion. At first glance, a nearly $12 billion outlay for a company projected to generate less than $300 million in revenue this year might appear steep. This is particularly noteworthy given that Whole Foods reported $16 billion in sales in fiscal 2017. Moreover, this acquisition arrives as Amazon is already heavily investing in AI infrastructure, a move that is expected to result in negative free cash flow in 2026, following a 71% decline in free cash flow to $11.2 billion in 2025.
However, the strategic rationale behind the deal is compelling. Morgan Stanley, in defending the acquisition, pointed out that its size is manageable relative to Amazon’s significant capital expenditures. Analysts further suggest that the integration could yield broader business applications for Amazon, including enhanced connectivity for warehouse automation and drone operations. Indeed, Leo’s significance extends far beyond its direct revenue potential, however substantial that may become. For a company forecasting roughly $800 billion in revenue this year, substantial initiatives are required to impact its trajectory. Leo’s capacity to fortify Amazon’s core retail and cloud businesses is what has underpinned its initial commitment of at least $10 billion to the project, and now, it justifies the Globalstar acquisition.
**A Deeper Look at Globalstar’s Strategic Value**
Globalstar operates a constellation of low Earth orbit (LEO) satellites, connecting over 120 countries and holding valuable wireless spectrum licenses worldwide. Crucially, Globalstar serves as Apple’s technology partner for its iPhone’s emergency satellite messaging and “Find My” services. Both Apple and Amazon have agreed to maintain and expand this collaboration for future Leo services. Currently, Globalstar manages approximately 24 satellites in orbit and has secured agreements to procure and deploy roughly 50 new satellites from Canadian firm MDA Space. This fleet will complement the 240 satellites Amazon has already deployed in LEO since April of last year. Amazon has received approval from the Federal Communications Commission (FCC) to launch an additional 7,700 satellites in the coming years, having secured an extension on an FCC mandate to have 1,600 in orbit by July.
Globalstar’s most coveted asset, however, lies in its extensive portfolio of spectrum licenses. Spectrum, the fundamental medium for wireless communication, is a finite, naturally occurring resource meticulously managed by regulators to ensure orderly data flow. Globalstar’s licenses are critical for enabling direct-to-device (D2D) services, which allow standard smartphones and other devices to connect directly to satellites without the need for cellular towers or specialized hardware, effectively bridging connectivity gaps in rural areas. The Globalstar-Apple partnership exemplifies this D2D capability.
This is particularly significant as Amazon Leo prepares to launch its commercial service, initially focusing on broadband internet for homes, businesses, and government entities. By 2028, Amazon intends to deploy a next-generation D2D satellite system capable of delivering voice, data, and messaging services directly to mobile phones, integrated with its existing broadband infrastructure. Amazon stated in a press release that owning Globalstar “enables faster deployment of D2D connectivity at scale—reaching areas where terrestrial deployment is delayed, cost-prohibitive, or vulnerable to disruption.” Morgan Stanley highlighted that Globalstar’s licenses empower Amazon to launch its D2D network “without being entirely reliant” on partnerships with mobile network operators for spectrum. This positions Leo more competitively against SpaceX’s Starlink, which commands an industry-leading presence with over 10,000 satellites and more than 10 million users. SpaceX, reportedly eyeing a late June initial public offering, has been expanding its D2D service capabilities, including a substantial $17 billion deal to acquire wireless spectrum licenses from EchoStar.
While Starlink is estimated by Citizens to generate $10 billion to $11 billion in annual revenue with high profitability, the market remains vast. PWC estimates that global consumer spending on mobile telecom services reaches $799 billion, expanding to $1.2 trillion when including fixed broadband and voice services, indicating ample room for multiple players despite Amazon’s later entry. AST SpaceMobile, another D2D player, is also making strides in the space, albeit with recent setbacks.
**Leo’s Strategic Integration within the Amazon Ecosystem**
The comprehensive offering of both broadband and D2D services is vital for Leo to achieve its full potential, appealing to both consumers and investors. Amazon CEO Andy Jassy emphasized in his recent shareholder letter the immense opportunity in expanding high-speed internet access to the billions globally who currently lack it, noting that “If you don’t have broadband connectivity, you can’t engage in many of the digital activities.” Jassy also highlighted “meaningful revenue commitments” for Leo from government and enterprise clients, including Delta Air Lines, JetBlue, AT&T, Vodafone, DIRECTV Latin America, and NASA. The potential inclusion of Apple as a customer, contingent on regulatory approval, further strengthens this pipeline.
A significant competitive advantage for Leo in the commercial and government sectors lies in its integration with Amazon Web Services (AWS), the world’s largest cloud computing service. Companies that rely on AWS for their computing needs represent a natural customer base for Leo. Analysts at William Blair noted that “The sales motion for Leo into those accounts is substantially easier than it would be for a standalone operator,” observing that “Early wins already illustrate the traction Amazon is getting in the enterprise segment, even though its service is not even commercially available yet.” This contrasts with Starlink’s approach, which has primarily focused on consumer adoption. William Blair estimates the enterprise opportunity at approximately $100 billion. The firm’s analysts, who maintain an outperform rating on Amazon’s stock, believe Leo can enable seamless data transfer from remote sites directly to AWS workloads, thereby enhancing AWS’s appeal and bolstering Amazon’s profit engine.
For consumer engagement, Amazon could leverage its Prime membership, boasting over 200 million global members, by bundling Leo’s connectivity services. Simultaneously, Leo could expand the Prime user base, particularly in rural areas where reliable internet access could make services like Prime Video more appealing. This initiative aligns with Amazon’s recent efforts to enhance its delivery capabilities in underserved rural communities.
Furthermore, William Blair highlighted Leo’s extensive internal applications, particularly within Amazon’s fulfillment and logistics network. The connectivity could prove invaluable for delivery vehicles operating in areas with limited cellular coverage and serve as a primary or backup connectivity solution for fulfillment centers and grocery stores, potentially driving cost savings and margin expansion across Amazon’s diverse businesses. The firm also pointed to growth opportunities with Prime Air, Amazon’s drone delivery service, in regions where ground delivery is more challenging.
While Amazon’s space ambitions are still unfolding and will undoubtedly require substantial future investment, the acquisition of Globalstar represents a strategically sound move. It solidifies the company’s commitment to satellite connectivity, a critical component for sustaining the long-term growth trajectory of the Amazon ecosystem.
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