What is Space Cloud? Defining the Evolution from Connectivity to Compute
From Ground Station Connectivity to Orbital Data Centers. Mapping the evolution of the $39B space economy.
Space Cloud is the term used by hyperscalers like AWS and Microsoft Azure to describe virtualized ground station services—connecting terrestrial data centers to satellites for downlink. However, the industry is rapidly evolving toward the Orbital Cloud, where compute and storage happen directly in orbit. This transition from "Space Cloud" (connectivity) to "Orbital Cloud" (compute) represents a fundamental shift in how data centers operate.
Gen 1: Connectivity
Antenna on Earth
Gen 2: Compute
Server in Orbit
The Divergence: Space Cloud vs. Orbital Cloud
| Feature | Gen 1: "Space Cloud" (Legacy) | Gen 2: "Orbital Cloud" (The Opportunity) |
|---|---|---|
| Primary Function | Connectivity & Downlink | Compute & Storage |
| The Bottleneck | Bandwidth (RF Spectrum) | Energy (Heat Rejection) |
| Key Players | AWS Ground Station, Azure Space | Starcloud, Axiom, SpaceBilt |
| Investment Thesis | "Better Internet" (5G/Starlink) | "AI Factories" (H100 Clusters) |
| Location of Data | Processed on Earth | Processed in Orbit |
Why the Definition is Changing
For the last decade, "Space Cloud" was a marketing term used by Hyperscalers (Microsoft Azure, Amazon AWS Ground Station) to describe virtualized ground station services. The Space Cloud model was about connecting terrestrial servers to satellites—downlinking data from orbit to process it on Earth. This "Gen 1 Space Cloud" approach focused on bandwidth optimization and RF spectrum efficiency.
We are entering the Orbital Cloud era (Gen 2). This is no longer about moving data to Earth; the Space Cloud definition is evolving. With launch costs dropping below $30/kg (Starship) and on-orbit power scaling to megawatts, the data center itself is migrating to orbit. The new Space Cloud opportunity is compute in space, not connectivity to space.
The Pivot: AWS and Azure are just "Digital Ground Stations." The real investment opportunity is the Orbital Data Center—where compute happens in orbit, not on Earth.
The Capital Stack
The Orbital Cloud ecosystem is organized into five distinct investment classes, each representing a different layer of the value chain.
Cloud Prime
Vertically integrated providers
Infrastructure
Buses, launch, and comms
Logistics
Transport, tugs, and assembly
Applications
Data products and services
Critical Inputs
Commodities and fuels