After hours on Tuesday, SpaceX’s shares saw a remarkable rise following the company’s announcement of a staggering 161% increase in quarterly revenue. This surge was largely driven by its artificial intelligence operations, which have now eclipsed its Starlink internet service as the leading revenue contributor.
This news arrived amidst speculation regarding a potential merger between SpaceX and Tesla. Elon Musk, who is at the helm of both companies, revealed during an earnings call that independent committees have been established to explore this possibility “at the request of shareholders.”
Musk, acknowledging his inability to take part in the discussions due to conflicts of interest, expressed his enthusiasm for the idea of such a merger. “Do I think it would be a good idea? Yes,” he noted, adding that any deal would need shareholder approval.
In terms of financials, SpaceX reported $14.58 billion in sales for the third quarter, with approximately $7.6 billion coming from its rapidly expanding AI segment, as outlined in their latest report. This marks a significant shift when compared to the $5.2 billion generated from Starlink, which just last year accounted for a dominating 61% of the company’s overall revenue.
The company also transitioned from a $541 million loss in the previous quarter to a net profit of around $4.4 billion, with adjusted earnings before interest, taxes, depreciation, and amortization rising to about $8.8 billion.
Following the announcement, SpaceX shares gained 4% to reach $154 after closing at $147.79 earlier that day. This earnings report comes just four months after SpaceX’s historic IPO in June, which raised approximately $85.7 billion and pegged the company’s valuation at around $1.75 trillion.
At Tuesday’s closing figure, SpaceX’s market capitalization was estimated to be around $2.01 trillion, placing it significantly ahead of industry giants like Boeing and Lockheed Martin.
The latest earnings highlight how swiftly SpaceX has diversified beyond its traditional rocket-launching roots since acquiring xAI in February. Its AI division, which includes products like the Grok chatbot and the social media platform X, has become the dominant revenue stream, contributing to roughly 52% of total sales in the third quarter. This is a substantial increase from $2.56 billion in the previous quarter and just $818 million in the first quarter of the year.
A big portion of this growth can be attributed to the leasing of computing capacity to external clients, transforming AI infrastructure into the quickest growing sector of the company’s revenue. Musk informed investors that “the constraint on deployment of superintelligence is more in power and cooling and infrastructure than it is in chips.”
He boldly compared SpaceX’s infrastructure expansion to “the New York Yankees playing in Little League,” asserting that the company has the potential to outpace all of its competitors.
Musk also mentioned that he has been spending up to four days a week in Memphis, home to a significant AI hub, to expedite the activation of the company’s second supercomputer cluster.
Previously, SpaceX revealed $14.1 billion in contracted AI cloud sales, although that figure includes revenue already recognized and does not equate to the company’s remaining backlog.
Starlink, while losing its title as the largest revenue source, still showed impressive results with a 69% leap in connectivity revenue year-over-year, generating around $2.4 billion in operating income.
The service’s subscriber count rose to 13.6 million, increasing from 12 million at the end of the second quarter. Last year, Starlink proved to be a highly profitable operation, earning $4.42 billion in operating income on $11.39 billion in revenue, which resulted in an impressive operating margin nearing 39%.
Musk expressed optimism about Starlink’s capabilities, anticipating “about a hundred times the bandwidth of the current Starlink constellation” within roughly three years as newer, more powerful satellites are launched. He noted that the recent Starship mission delivered the equivalent bandwidth of 10 Falcon 9 launches.
However, all this rapid expansion comes with a hefty price tag. In the third quarter, SpaceX incurred about $19.6 billion in capital expenditures, with roughly $16.4 billion earmarked for AI infrastructure.
Looking towards the future, Musk indicated that SpaceX plans to attempt to catch both the Starship booster and spacecraft during its upcoming Flight 15 next month, which he described as a “massive technology milestone.”
“I’d say it’s more likely than not that this succeeds next flight,” Musk told investors while also revealing there are additional Starship launches scheduled for the remainder of the year.
He projected that the company could start executing weekly Starship launches in the first half of next year, possibly ramping up to two launches a week by the latter half.
