Despite a lot of small satellites going up on SpaceX rockets, they aren't the ones pulling in large amounts of money for SpaceX. Most of the small satellite launches (with the exception of the recent SSO-A mission) are secondary payloads on a larger launch.

There is a lot of demand for smaller launchers. With smaller launch vehicles you can get more flexibility in what orbit you want to go in to. On the larger launches, the small satellite manufacturers have to adapt somewhat to the launches that are available. There is demand from both the commercial and DoD [1].

[1] https://spacenews.com/pentagon-procurement-chief-ellen-lord-...