Amazon’s big investment in Kuiper is proving to be a smart bet
Amazon ‘s Project Kuiper has not made a dime yet. But recent updates boost our confidence that the ambitious satellite internet initiative could soon be a new cog in the tech giant’s money-making machine. “There’s so much to like here” with Amazon, Jim Cramer said in the wake of its second-quarter earnings report . “Right now, we have [Amazon Web Services], advertising, and then we have retail. I think two years from now, we’re also going to have Amazon Home and Kuiper.” Perhaps it’s not surprising that Amazon, founded by Jeff Bezos, is going after a market now dominated by Starlink and SpaceX, which was founded by his commercial space competitor, Elon Musk. Starlink launched its first satellites in 2019, the same year that Amazon signaled its intention to build a constellation of satellites to provide internet service. After years of development, Kuiper’s first full deployment was earlier this year and they’ve continued since then, including on Monday. The power of these types of satellites has been on display during Russia’s ongoing war against Ukraine. In a country devastated by war, Starlink has been used to provide internet in Ukraine. Starlink has also been used in the U.S. to help coordinate natural disaster relief efforts, including last month’s deadly floods in Texas. Any rivalry between the billionaire space cowboys aside, delivering broadband via satellite to 400 million to 500 million households worldwide without access to high-speed internet is big business. The kicker for Amazon? Getting new people and businesses connected to the internet in hard-to-reach places gives the company a chance to bring new customers to its Prime ecosystem and its Amazon Web Services (AWS) cloud. “Amazon is as strong as it’s ever been,” Jim added. Despite delivering a better-than-expected top and bottom line, Amazon shares fell more than 8% the day after earnings on Aug. 1. The decline stemmed from a modest revenue beat from AWS and mixed third-quarter guidance. Jim called the drop a buying opportunity for investors. Shares have recovered some of their losses since then. Beyond the headlines were promising developments for Kuiper. Amazon CEO Andy Jassy said on the earnings call that Kuiper has already signed enterprise and government contracts, even though it has not yet launched commercially. That’s expected to happen later this year or early 2026. The company plans to launch a network of over 3,000 satellites into low Earth orbit. The rollout is happening fast. After launching its first satellites in April, Kuiper sent up its third batch in mid-July — using rival SpaceX’s Falcon 9 rocket to carry 24 Kuiper satellites into orbit. Additional satellites were sent up Monday morning after some weather-related launch delays, bringing the size of Amazon’s constellation above 100. Kuiper must have 1,600 satellites in orbit by the end of July 2026 to meet a deadline set by the Federal Communications Commission. Starlink currently leads the satellite internet market with roughly 8,000 satellites and about 5 million users globally. Still, Jim sees Kuiper as a formidable challenger, predicting that “Kuiper is going to rival Starlink.” Some on Wall Street agree the venture could strengthen Amazon’s so-called flywheel. “Kuiper will be a compelling offering and easy add for consumers (Prime), enterprises (AWS), and governments,” BMO Capital Markets wrote in a recent note, echoing Jim’s analysis. To be sure, analysts see the end of 2027 as the earliest Amazon could see any meaningful revenue contribution from Kuiper. With that long runway comes a high price tag. Kuiper requires significant upfront capital investment to scale its network and acquire customers. That cash burn, which is estimated to total more than $10 billion , can be seen by investors as affecting Amazon’s profitability. While that may be the case in the near term, Jassy previously said that Kuiper “has really good return on invested capital.” In a “Mad Money” interview in late June, Jassy likened Kuiper to having “a lot of the same financial characteristics as AWS,” which Amazon has built into the world’s largest cloud provider by revenue. While new ventures carry risk, we take comfort in Amazon’s proven track record in taking self-started internal ventures and turning them into thriving businesses. AWS was one for sure, but Amazon also successfully launched Kindle, which disrupted the publishing and eBook industries. Prime Video is another example, and the list goes on and on. So, Kuiper might be costly upfront, but Amazon has shown it can manage capital efficiency and scale with discipline. Following its latest earnings report and an upbeat update on Kuiper, we reiterated our buy-equivalent 1 rating on Amazon stock and increased our price target to $250 from $240. (Jim Cramer’s Charitable Trust is long AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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