More Than a Merger Trade
SpaceX shareholders got an earnings beat and a possible Tesla merger in the same evening. SpaceX (NASDAQ: SPCX) shares jumped roughly 10% after Tuesday’s report, as Musk confirmed that independent board committees were discussing a combination of his two public companies.
Merger speculation is an easy headline to trade. Fortunately for shareholders, the earnings provided something more concrete underneath it.
Third-quarter revenue reached $14.6 billion, up 161% from a year earlier and above the $12.72 billion consensus cited in the supplied coverage. SpaceX also reported $2.8 billion in operating income and $4.4 billion in net income. Its AI segment generated $7.56 billion in sales, compared with $813 million a year earlier.
Management expects total revenue of $33 billion to $37 billion in the first quarter of 2027. Delivering that forecast would mean more than doubling the latest quarter’s sales within six months. Even without a Tesla transaction, shareholders have a substantial growth story to assess.
SpaceX Is Collecting Rent on the AI Boom
Some of the most revealing comments concerned what customers will pay to use SpaceX’s computing infrastructure.
Musk said short-term computing contracts were renewing at higher prices per watt, and that SpaceX could rent its available capacity several times over. His preference is to keep contracts short rather than lock in longer agreements, reflecting his expectation that computing will become more valuable.
Think of a landlord choosing shorter leases because tenants keep offering more for the same space. Higher renewal prices give SpaceX a reason to keep building. They also offer a useful counterpoint to fears that AI infrastructure is expanding without enough paying customers.
For CoreWeave (NASDAQ: CRWV) and Nebius (NASDAQ: NBIS), the encouraging possibility is that scarce capacity can command prices high enough to absorb expensive financing. SpaceX’s experience supports that argument, although each operator still has its own borrowing costs and customer commitments.
SpaceX also has a profitable business beneath the construction sites. Connectivity, which includes Starlink, produced $2.37 billion of operating income, compared with $431 million from AI. AI supplies the growth story; Connectivity still supplies most of the operating earnings.
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The Merger Still Needs a Price
SpaceX spent $19.6 billion on capital projects in the third quarter. Management expects another $35 billion to $40 billion this quarter. Short rental contracts allow the company to capture rising prices quickly, but leave future income more exposed if customers gain alternatives.
A combination with Tesla (NASDAQ: TSLA) would add another layer to those investment decisions. Musk pointed to cooperation across AI software, chip design, robotics and connectivity, while confirming that no transaction terms had been agreed.
Shared technology makes an appealing pitch. The exchange terms would determine how much of the combined business existing shareholders actually own, and whose future spending they would help finance.
SpaceX’s earnings have given investors a reason to take its AI ambitions seriously. Any Tesla proposal will need to show why owning a smaller share of a larger company improves on what those investors already have.
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