SpaceX posts $14.6 billion revenue, but its $19.6 billion spending spree raises questions

SpaceX (SPCX) reported $14.58 billion in third-quarter revenue, but its reported $19.6 billion spending spree has raised questions about the cost of its aggressive expansion into artificial intelligence.

According to the earnings report, revenue jumped 161% from last year, helped by rapid growth in its AI operations and satellite internet business. The company also reported adjusted earnings of 45 cents per share, comfortably beating Wall Street’s estimate of 13 cents.

This caused SpaceX’s stock price to rise by around 8% during extended trading on Tuesday. The consensus revenue estimate from analysts at LSEG was $12.72 billion. The firm reported operating income of $2.8 billion and net income of $4.4 billion, as opposed to a net loss of $1.05 billion the previous year.

Starlink generates most of SpaceX’s profits as its AI business expands ninefold

Despite its reputation for reusable rockets, SpaceX makes most of its money from Starlink, its satellite internet service. Starlink ended the quarter with 13.6 million subscribers, up from 12 million three months earlier.

The company’s connectivity division generated $5.25 billion in revenue, representing 69% annual growth from $3.1 billion. Wall Street had expected $4.84 billion, based on StreetAccount estimates.

Residential internet subscriptions brought in $3.12 billion, while government agencies and corporate customers contributed another $2.13 billion.

The division’s operating earnings nearly doubled to $2.37 billion, making it the company’s biggest profit source.

Its rocket launch operations recorded a much smaller increase, with sales reaching $1.77 billion, compared with $1.67 billion last year. SpaceX’s space division lost $7 million.

On the other hand, AI operations generated an operating profit of $431 million. The company also made its $60 billion acquisition of Cursor, an AI coding company, in the quarter.

SpaceX CFO Bret Johnsen said in the call event that he anticipates revenues to range from $33 billion to $37 billion in the first quarter of 2027, surpassing analysts’ forecasts of $22.2 billion.

He attributed this to increased demand and improved visibility for future computing deals.

In an even more optimistic prediction, Elon Musk stated that infrastructure services, cloud deals, and paid Grok AI offerings can create annual recurring revenues ranging from $500 billion to $1 trillion by late 2027.

For comparison, LSEG analysts expect approximately $110 billion in total revenue for 2027, more than double this year’s projected figure.

Elon pushes talks for Tesla merger while options traders play on future SpaceX success

Elon confirmed that SpaceX and Tesla (TSLA) have established separate board committees to examine a possible merger following requests from shareholders.

The committees consist of independent directors. Elon said he cannot join negotiations because his ownership interests create a conflict. Elon said:

“I do think there’s a lot of merit to combining the companies as we are pretty much in the superintelligence singularity, and there’s a lot to be gained from cooperating. Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this.”

Tesla shareholders would face a demanding approval requirement. Elon added that:

“We will need a 50% vote of all shares, not just those who vote, but of all shareholders, and that’s quite a high hurdle.”

SpaceX is also working on AI chips in collaboration with Tesla and Intel (INTC) and aims to achieve mass production by Q3 2028.

The production will happen at the Terafab plant that was planned in Texas. Elon Musk thanked ASML (ASML) and other vendors for giving priority to the delivery of equipment.

The project was provided with heavy tax incentives in June despite the protest from locals concerned about the strain on local resources.

On the other hand, the derivatives markets expected a post-earnings stock move of 6%, according to Cboe LiveVol.

Previously, SpaceX declined by 13% after reporting its earnings in August, but then rose by 60% over two months. The stock price then fell up to 19% over the last two weeks.

According to Barchart, the number of outstanding call and put contracts was about the same, although recently there was a bias toward call options.

On Monday, the volume of options trading reached 1.1 million contracts, which was 20% more than the 30-day average.

Of those, 665,000 were calls. Buying exceeded selling, while traders also purchased more calls than puts and sold more puts than they bought.