Don't look now, but space is about to get a whole lot more crowded.
From 2022 through 2027, the second phase of Space Force's National Security Space Launch program (NSSL-2) initially included 25 planned space launch missions and about $5.5 billion in contracts, split roughly 60-40 between United Launch Alliance, or ULA, a joint venture between Boeing(NYSE: BA) and Lockheed Martin(NYSE: LMT), and SpaceX, Elon Musk's privately held space company. (Although both the number and the value has since grown.)
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With still two years left to go before NSSL-2 wraps up, however, earlier this month the Space Force announced the winners of a new series of contracts for the third phase of NSSL, NSSL-3, which will run from 2027 through 2032. Despite being the same duration as NSSL-2, however, NSSL-3 is going to involve even more space launches -- and a whole lot more money.
NSSL-3 facts and figures
Over the five years running from 2027 through 2032, Space Force intends to launch 84 times in NSSL-3, and a series of defense contract announcements released earlier this month implies that the total money spent on space launch will roughly double to $13.7 billion in total. That's a big increase, and a lot of money on offer. What's truly surprising about NSSL-3, however, is how the money's getting distributed.
For the first time ever, SpaceX will win a larger share of the Space Force's business than does its archrival ULA.
According to the Department of Defense, $5.9 billion of the NSSL-3 awards will go to SpaceX as a "Lane 2" proven launch provider using already certified rockets. That's about 43% of total funds on offer -- an increase from SpaceX's percentage win in NSSL-2. The DOD further clarifies that these funds will pay for not only launch services, but also other "mission unique services, mission acceleration, quick reaction/anomaly resolution, special studies, launch service support, fleet surveillance, and early integration studies/mission analysis."
In contrast, ULA will receive less than $5.6 billion for its share of NSSL-3 Lane 2 contracts (NSSL3.2), or less than 40% of total NSSL-3 funds.
Bringing up the rear, Jeff Bezos' private space company, Blue Origin, will receive $2.4 billion in NSSL3.2 funds. That's less than 18% of the total, but this is the first time Blue Origin will be winning any NSSL funds, so from that perspective, the increase from 0% to 18% makes Blue Origin the biggest winner on this contract.
No other space companies won NSSL3.2 contracts. However, as noted last week, two other companies bidding as-yet uncertified rockets, Rocket Lab(NASDAQ: RKLB) and privately held Stoke Space, were awarded contracts under the NSSL-3 Lane 1 (or NSSL3.1, covering launch missions using experimental rockets) program. Alongside SpaceX, ULA, and Blue Origin, these companies will split $5.6 billion in awards under the Lane 1 program.
Image source: Getty Images.
Great news for SpaceX, but less great news for Boeing and Lockheed
This latest space news is therefore pretty great news for all sorts of space companies. SpaceX is the most obvious winner as it's getting the biggest pot of money. Blue Origin is presumably happy just to be nominated for a change, as are Rocket Lab and Stoke.
But what about ULA? What about Boeing and Lockheed, which at the present time, after all, represent two-thirds of the publicly traded space stocks participating in the NSSL program that investors can actually invest in? I'm afraid the news is worse for these two stocks, and arguably even worse than it seems.
Not only do Boeing and Lockheed have to split the proceeds of only 40% of the money on offer from NSSL3.2, instead of the 60% share they received last time around, but they could also, potentially, get even less than that.
According to a report from SpaceNews, you see, Space Systems Command has already begun handing out "task orders" awarded under the NSSL3.2 umbrella contract, naming SpaceX to conduct seven specific launch missions in fiscal 2025, but ULA only two. Originally, the split was supposed to be much closer, and much more resembling a total split in funding under NSSL3.2, with SpaceX running five missions, and ULA four. Delays in the construction of new West Coast launch facilities for ULA's Vulcan rocket, however, convinced Space Force to shift a couple of missions originally earmarked for ULA to SpaceX instead. (Delays in ULA winning certification for Vulcan may have also contributed to Space Force's decision.)
With Vulcan finally certified, investors in Boeing and Lockheed can hope that over time, the task order awards will get smoothed out, and that ULA won't lose too much business to its rocky start. But whether that hope will be fulfilled remains to be seen.
One thing's for certain: The longer ULA takes to ramp up its launch cadence, the more likely it is to lose market share to not only SpaceX, but to new space company rivals Blue Origin, Rocket Lab, and Stoke Space, too.
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