SpaceX delivered a stellar third-quarter performance, significantly surpassing Wall Street’s revenue and earnings forecasts, driven by a ninefold surge in its “Super Intelligence” (AI) business and robust growth in its Starlink connectivity service. Adding to the buzz, CEO Elon Musk revealed that both Tesla and SpaceX have established special committees to explore a potential merger, a move he believes holds substantial merit for future cooperation in areas like software and chips. This comes as SpaceX continues to expand its AI infrastructure with massive capital investments and plans for AI chip production.
SpaceX shares surged by approximately 8% in extended trading on Tuesday after the company unveiled a phenomenal third-quarter performance, significantly outperforming Wall Street’s expectations with a 161% jump in revenue. The artificial intelligence sector, rebranded as “Super Intelligence,” proved to be a major driver, experiencing a ninefold expansion.
During the earnings call, CEO Elon Musk floated the idea of a merger with his automotive giant, Tesla, deeming it a “good idea.” He further confirmed that the boards of both companies have already established special committees to deliberate on this potential tie-up. Tesla is set to release its third-quarter results on Wednesday after the market closes.
SpaceX’s impressive Q3 financials against LSEG consensus estimates were:
- Revenue: $14.58 billion (vs. $12.72 billion expected)
- Earnings per share: 45 cents adjusted (vs. 13 cents expected)
The company's official release highlighted an operating income of $2.8 billion and a net income of $4.4 billion, a stark contrast to the $1.05 billion net loss reported in the same period last year.
CFO Bret Johnsen provided a forward-looking perspective, projecting revenue for Q1 2027 to be between $33 billion and $37 billion, significantly higher than the average analyst estimate of $22.2 billion. This optimistic forecast is based on “increased visibility into our compute contract pipeline over the next six months.”
While SpaceX is renowned for its pioneering reusable rockets, its recent financial success has largely been fueled by its connectivity division, primarily through the Starlink satellite internet service. Starlink's subscriber base expanded to 13.6 million this quarter, up from 12 million in the preceding period.
Total connectivity revenue soared by 69% to $5.25 billion, compared to $3.1 billion a year prior, beating analyst expectations of $4.84 billion. Consumer Starlink subscriptions generated $3.12 billion, while government and enterprise clients contributed $2.13 billion.
The company is also making strategic moves in the mobile network space, having acquired 800 MHz of low-band spectrum and secured FCC approval for a 15,000-satellite constellation to build a U.S. mobile network.
SpaceX’s dive into artificial intelligence, initiated with the acquisition of Musk’s AI lab xAI earlier this year, has proven to be incredibly lucrative. The AI business, now dubbed “Super Intelligence,” has emerged as the company’s largest segment, with revenue skyrocketing ninefold to $7.56 billion from $813 million last year, surpassing analyst predictions of $6.47 billion. This growth was further bolstered by the $60 billion acquisition of AI coding startup Cursor during Q3.
In comparison, SpaceX’s traditional launch business saw a modest increase, with sales rising to $1.77 billion from $1.67 billion year-over-year. The bulk of SpaceX’s profitability continues to stem from Starlink, with its connectivity unit’s operating income doubling to $2.37 billion. The AI business turned a profit of $431 million, while the space division reported a $7 million loss.
Musk anticipates annual recurring revenue from infrastructure, cloud deals, and Grok AI models to reach an astounding $500 billion to $1 trillion by the end of next year, far exceeding analysts’ 2027 revenue projections of $110 billion.
SpaceX generated revenue of $1.77 billion from launches
SpaceX's launch division recorded $1.77 billion in revenue for the third quarter. CEO Elon Musk highlighted Starship Flight 14 as a significant achievement and announced ambitious plans for its next test flight, aiming to "catch both the booster and the ship." He confirmed a steady schedule of Starship test flights through the end of the year, accelerating into next year.
The company also revealed plans for a $100 billion spaceport in Louisiana, with COO Gwynne Shotwell targeting its first launch by 2029, though Musk suggested a possibility by late 2028.
SpaceX must face NAACP lawsuit over air pollution in Memphis area
The U.S. Department of Justice failed to quash a lawsuit filed by the NAACP against SpaceX, which alleges Clean Air Act violations regarding the company's Colossus data centers in the Memphis area. The DOJ had argued that the NAACP's request to temporarily cut power to the data centers threatened "American national, economic, and energy security."
The NAACP claims SpaceX constructed and operated gas-burning turbines for power without proper permits and lacking required pollution controls. A judge, in an order published Tuesday, affirmed that there was "no 'fairly possible' interpretation of the Clean Air Act that would give the United States the right to unilaterally dismiss a citizen suit."
Musk says Tesla-SpaceX merger would be 'good idea'
Elon Musk confirmed that both Tesla and SpaceX boards have established special committees to explore a potential merger, initiated "at the request of shareholders." He emphasized that these committees are composed of independent directors, and as a "conflicted party," he will not participate in the discussions.
Musk expressed strong belief in the "merit to combining the companies as we are pretty much in the superintelligence singularity, and there's a lot to be gained from cooperating" on software, chips, and other advancements. He stated, "Do I think it would be a good idea? Yes." However, he stressed the necessity of shareholder support, noting that a 50% vote of all shares (not just those voting) would be required on the Tesla side, which he termed "quite a high hurdle." Venture capitalist Ira Ehrenpreis serves on both company boards.
Musk targets 2028 for start of chip production at Terafab
During the call, Musk revealed SpaceX's ambition to achieve "volume production" of AI chips by Q3 2028 at its planned Terafab factory in Texas. These chips are being developed in collaboration with partners Tesla and Intel. He acknowledged and thanked ASML and other suppliers for prioritizing equipment deliveries for the facility. SpaceX had previously secured significant tax incentives for the Terafab factory in June, despite local opposition regarding resource strain.
Musk ordered restrictions on Starlink in Ukraine, according to WSJ
A Wall Street Journal report on Tuesday claimed that Elon Musk imposed restrictions on the military-grade Starlink service, Starshield, in Ukraine recently. These limitations reportedly hampered some military operations and Ukraine's defensive capabilities against intensified Russian attacks. Musk had previously attributed any restrictions to the U.S. government and then-President Donald Trump, stating on X, “Starshield systems are owned and controlled by the US government.” However, the Journal, citing an informed source, reported that Musk discussed the matter with senior administration officials, including Trump, before implementing a speed cap that caused Ukrainian drones to lose Starshield connectivity above 100 mph.
SpaceX's AI catalysts
SpaceX’s shareholder presentation detailed that its AI growth was propelled by “the activation of new cloud services agreements, the acquisition of Cursor and increased Grok adoption.” Of its $19.6 billion in capital expenditures for the quarter, a staggering $16.4 billion was allocated to the AI business. Musk stated that SpaceX aims to "deploy power, cooling infrastructure at a rate that is vastly faster than anyone else." Its Memphis-area data centers are on track to bring 200,000 of Nvidia's Grace Blackwell systems online "every month for the remainder of this year."
Starlink subscriber count rises to 13.6 million
Starlink's subscriber base expanded to 13.6 million in the third quarter, up from 12 million in the previous period. Average revenue per user (ARPU) also increased to $69 from $66. An investor update proudly noted Starlink's activation in over 3,800 aircraft by quarter-end, including American Airlines. This news follows a recent public challenge from Musk to Delta CEO Ed Bastian for not yet integrating Starlink internet on their planes.
SpaceX earnings call coming half hour after the close
SpaceX held its third-quarter earnings call at 4:30 p.m. ET. Shareholders were encouraged to submit questions online beforehand.
Tesla reports results on Wednesday
Tesla, Elon Musk's other major public company, is scheduled to announce its third-quarter results on Wednesday. Analysts, according to LSEG, anticipate a slight dip in revenue compared to last year, projecting $27.9 billion. Tesla shares have declined approximately 17% this year, placing its market cap at nearly $1.5 trillion.
Tough time for neoclouds
SpaceX is a relatively new entrant into the cloud computing market, a sector where many "neocloud" competitors are currently facing significant pressure on Wall Street. Concerns about rising interest rates making costly infrastructure buildouts financially burdensome have led to steep declines. CoreWeave and Nebius, for instance, are down 28% in October, while IREN has plunged about 35%. Earlier this month, Australian AI data center operator Firmus withdrew its planned IPO due to market volatility.
While SpaceX's business model is less dependent on cloud computing than these specialized firms, capital costs remain a factor. The company is heavily banking on the continued AI boom; its debt and finance leases increased to $36.8 billion in Q2, up from $22 billion in the prior period.
How the stock has done since the IPO
Since its IPO on June 12, opening at $150, SpaceX shares have seen a slight dip to $147.50, giving the company a market cap of approximately $2 trillion. The stock reached a low of $104.83 on August 3, just before the first post-IPO lockup period expired, making over 911 million shares available for trading. Following the lockup's lift on August 6, the stock rallied, initially gaining 6% and then nearly 16% the subsequent day.
Starship hits several milestones, but is still being tested
SpaceX remains a crucial launch provider for the U.S. Defense Department and NASA. Historically, the launch business has not been profitable, but it is central to the public's fascination with the rocket manufacturer. In the second quarter, launch revenue was reported at $962 million, alongside a net loss of $542 million.
Future profitability in this segment is heavily dependent on the success of SpaceX's Starship mega-rocket, which is still under development and undergoing rigorous testing. Since the last earnings call in August, Starship achieved significant milestones, including reaching orbit and deploying dozens of its new V.3 Starlink satellites during Test Flight 14. However, the rocket is not yet consistently reliable or reusable. Investors are eagerly awaiting updates on pending NASA missions and the future of the older Falcon rocket, as SpaceX has reportedly ceased allowing other companies to launch cargo on Falcon missions.
Capex and the SpaceXAI data center build out
In its inaugural earnings report in August, SpaceX disclosed capital expenditures of $18.4 billion, with a significant 80% directed towards its artificial intelligence division. This substantial investment initially caused investor apprehension, leading to a dip in shares post-report.
Following the merger of SpaceX and xAI in February, the company has heavily invested in establishing itself as a key player in the AI market, currently dominated by entities like OpenAI, Anthropic, and Google. The AI division also acquired Cursor for $60 billion and is now known as either SpaceXAI or SpaceXSI, with "SI" referring to President Donald Trump's preferred term, "Super Intelligence."
Analysts are bullish on SpaceX ahead of earnings
Wall Street exhibited bullish sentiment toward SpaceX ahead of its third-quarter earnings report. Mizuho, with an "outperform" rating and a $200 price target, highlighted AI as the primary "swing factor" for Q3 revenue and EBITDA. Analysts anticipated significant growth in AI revenue and adjusted EBITDA for the quarter.
Following SpaceX's recent acquisition of low-band spectrum, analysts expected discussions on strategic collaborations or competitive maneuvers within the connectivity sector. Cantor Fitzgerald, with an "overweight" rating and a $246 price target, suggested initial commentary would focus on how SpaceX can leverage connectivity in global markets, foreseeing low-band distribution as a future intelligence lever. Oppenheimer, however, maintained a more conservative outlook, expecting "in-line" results with reiterated guidance, noting a slowdown in industry subscriber growth and a shift towards cost-cutting via AI.
Musk says he's giving stock to U.S. kids
Elon Musk announced on Monday his intention to gift one SpaceX share to every child in the U.S. next year. This initiative, if realized, would distribute approximately $10.5 billion worth of shares, considering 72 million children under 18 in the U.S. as of July 1, 2025. Musk, whose net worth exceeds $900 billion, posted on X that this would be "the first of many," though his past philanthropic commitments have a mixed track record.
Starshield issues in Ukraine
Starshield, the military variant of Starlink, has recently faced scrutiny due to restrictions in Ukraine, which reportedly hindered the nation's defense against escalating Russian aggression. Ukrainian officials claimed that SpaceX and the Trump administration imposed these restrictions without warning, causing military drones operating above 100 mph to lose connectivity. While Musk initially attributed these changes to the U.S. government and President Donald Trump, Trump denied issuing such orders. Ukrainian President Volodymyr Zelenskyy confirmed that these restraints remained in effect over the weekend. Amid these concerns, investors have begun backing potential Starlink competitors, including Eutelsat.
An update on cloud computing revenue
Following its acquisition of xAI in February, along with its data centers in and around Memphis, Tennessee, SpaceX has forged lucrative cloud computing agreements, creating a significant new revenue stream. Deals with major players like Google, Anthropic, and Reflection AI, plus an unnamed customer mentioned by SpaceX CFO Bret Johnsen, could generate tens of billions in annual revenue. SpaceX is reportedly pursuing up to $40 billion in funding to acquire more Nvidia chips, bolstering its ambitious AI endeavors. Investors are closely monitoring updates on this business segment as SpaceX seeks to further monetize its AI capacity.
Speculation builds around a possible Tesla-SpaceX merger
Ahead of the earnings call, a highly upvoted shareholder question concerned the timeline for a potential merger between SpaceX and Tesla. The two companies, both under Elon Musk's leadership, have maintained business and financial ties for years, including shared personnel and board members. Notably, Tesla invested $2 billion into xAI, which was later converted into SpaceX shares. SpaceX's AI unit also purchased $430 million in Tesla Megapacks and $143 million in Cybertrucks last year.
With SpaceX going public in June, merger speculation has intensified. SpaceX COO Gwynne Shotwell previously suggested a merger "might make Elon's life a little easier." Further fueling excitement, the recent demo of Tesla's next-generation Roadster, developed with SpaceX technology—including cold gas thrusters for unique aerial maneuvers—highlighted the deep integration between the two entities.
