SpaceX Turns a Profit as Starlink and AI Computing Drive Strong Q3 Growth

SpaceX had a very strong Q3. The company moved from losses to profit, while revenue more than doubled. This was SpaceX’s first profit as a public company, and the results were much better than the market expected.

The main drivers were the new Superintelligence (SI) business, which started earning money from its new computing capacity, and the acquisition of Cursor. Starlink also continued to add subscribers, while SpaceX completed 35 launches during the quarter.

Investors will potentially watch whether the company’s much higher spending in Q4 leads to more contracted computing revenue. They will also watch whether Starship can reach weekly launches in the first half of 2027 and whether the recently confirmed talks about a possible Tesla merger make any progress.

Key Financial Metrics

Group:

●     Revenue: $14.6bn, up 161% from the same period last year

●     EBITDA: $8.8bn, up 306% year-on-year, compared with $2.2bn previously

●     Reported after-tax profit: $4.4bn, compared with a loss of $1.1bn in the same period last year

●     EPS: $0.35, compared with a loss of $0.36 last year

Space — Launch Business:

●     Revenue: $1.8bn, up 6% year-on-year and 84% from the previous quarter

●     Launches: 35 during the quarter, including 12 major customer missions

Connectivity — Starlink:

●     Revenue: $5.2bn, up 69% year-on-year and 22% from the previous quarter

●     Enterprise and government revenue: Up 91% year on year

●     Aviation contracts: Cover about 12 000 aircraft

Superintelligence — SI:

●     Revenue: $7.6bn, up $6.7bn from last year

●     EBITDA: $5bn, up $5.4bn year on year

Analysis and Outlook

Share Price Performance:

Since its IPO at $135 on 12 June, the stock is up about 9.5%. However, it is still about 39% below its all-time high of $225.64. The company has been listed for less than five months, so there is no 12-month comparison yet. SpaceX does not pay a dividend.

What Could Move the Share Price:

Possible positive drivers:

●     Starship progress: If SpaceX reaches weekly launches in the first half of 2027, it could potentially lower costs and help the company deploy Starlink V3.

●     Revenue growth: Management is targeting annual recurring revenue of $100bn by the end of 2026. It expects Q1 2027 revenue of $33 bn - $37 bn. Musk believes annual recurring revenue could reach $500bn - $1tn by the end of 2027.

●     Computing revenue: New computing capacity is reportedly paying for itself in less than one year. Pricing is above the earlier range of $30 - $50 per watt, and the company is targeting 10 gigawatts of capacity in 2027.

●     Possible Tesla combination: Special committees have been formed, and Barclays has suggested that an announcement could come before Tesla’s December meeting.

Possible negative drivers

●     High spending and funding needs: Q4 capital spending is expected to be $35bn - $40bn, about twice the Q3 level. Management also wants to maintain an investment-grade financial profile.

●     Cursor costs: SpaceX will count $23bn of staff retention incentives as an expense over three years. Some of the SI growth also came from buying Cursor, not from the business growing on its own.

●     Execution and governance risks: Starship could still fail. The power and chip targets are ambitious, and the first test chip isn’t due until May or June 2027. The Tesla deal may never happen, and Musk has a possible conflict of interest in it.

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** This article was prepared by BROKSTOCK analyst Maboko Seabi