SpaceX delivered stronger-than-expected revenue in its debut earnings report, but the market reaction centered on a different question: how much investors are willing to tolerate as Elon Musk pushes the company deeper into AI infrastructure.
The company reported fast growth, a smaller-than-expected net loss, and rising AI revenue. Yet its shares fell after investors saw the scale of planned spending on data center capacity and the expectation that the spending pace would continue.
Strong numbers were overshadowed by AI capex
SpaceX posted quarterly revenues of $7.8 billion, above analysts’ estimates of $6.82 billion and up 92 percent from a year earlier. Its net loss was about $541 million, better than estimates of $2.12 billion.
Those figures would normally give a newly public company room to argue that its growth story is on track. Instead, the focus shifted to capital expenditure. SpaceX reported almost $16 billion of capital expenditure on AI, double the previous quarter and above Wall Street’s expectations.
The company also said that spending would continue at current levels for at least two more quarters. That detail matters because the concern is not only the size of one quarter’s outlay, but the possibility that heavy investment becomes a defining feature of the business.
Shares in SpaceX fell 10 percent in early trading. The reaction came after an initial public offering in June that raised $86 billion and was supported by expectations of very rapid revenue growth in the years ahead.
The data center plan is becoming central to SpaceX
Musk told investors that SpaceX plans to expand computing capacity from 2 gigawatts at the end of this year to “closer to 10GW [than 5GW]” by the end of 2027. The source article notes that each gigawatt of new capacity costs tens of billions of dollars to develop, with chips accounting for the bulk of that spending.
Musk also said future infrastructure development would rely exclusively on Nvidia hardware. That gives investors a clearer picture of the company’s preferred technology path, but it also reinforces the capital intensity of the plan.
At the highest end of Musk’s estimate, SpaceX’s data centers would consume as much power as New York City at the peak of summer by the end of 2027. That comparison helps explain why the earnings call drew so much attention: the company is not describing a modest AI add-on, but a large infrastructure buildout.
The strategy is built around the demand for computing power. Musk is betting that SpaceX can use its hardware development experience and its broader operating base to become a major supplier of AI infrastructure.
AI revenue is growing, but the model raises questions
SpaceX’s AI revenue more than trebled from the previous quarter to $2.56 billion. Most of that revenue came from deals to lease data center capacity to rival AI groups, including Anthropic and Google.
That leasing approach has helped near-term revenue. It also creates a tradeoff. According to the source article, leasing data center capacity limits SpaceX’s ability to train and run its own competitive AI models.
Bret Johnsen, SpaceX’s chief financial officer, told investors that the group would generate more than $100 billion in annual recurring revenue by the end of the year, with cloud services providing most of the growth. That forecast places cloud services near the center of the company’s financial story.
Some analysts focused on the margin implications. Dec Mullarkey, managing director of SLC Management, said SpaceX’s data center leasing could hold it back: “Their margins are going to be capped if they are primarily a cloud company,” he said.
Melissa Otto, global head of Visible Alpha research at S&P Global, framed the market’s reaction around the spending itself. “I think what the investment community wasn’t overly excited about was the capex number in the AI segment,” she said. “It’s ambitious.”
The valuation depends on several big ambitions
SpaceX’s share price has already moved sharply since the company went public. Its shares initially surged, but they have shed around half their value, from a peak of $225 in the week after going public to $112 on Wednesday.
The company’s $1.65 trillion market capitalization depends on investors believing in several ambitious goals at once. Those include reaching Mars with reusable rockets, putting data centers into orbit, and playing a major role in AI development.
Goldman Sachs, a bookrunner on SpaceX’s offering, expects the company’s AI revenue to increase 100-fold by 2030. Musk said on Tuesday that SpaceX could hit $1 trillion in revenue by the end of the decade.
On the earnings call, Musk also discussed the company’s first generation of orbital data centers, called Starmind AI-1. “This is not some sort of far-future, distant thing. We expect to start launching these next year,” he said.
The latest series of Grok AI models are being trained on SpaceX data. Musk said this would give the company’s tools an advantage in engineering. He also argued that the potential of Starlink, SpaceX’s satellite Internet unit, was “under-appreciated.”
Investors are watching pressure on the stock
The earnings report arrived while some traders were betting against SpaceX shares. Short interest has risen to the equivalent of 220 million shares, or roughly 34 percent of the freely traded shares, according to data provider S3 Partners.
Analysts at Deutsche Bank said the end of the stock’s initial lock-up period for employees on Thursday was weighing on the equity price. The bank also pointed to “lower than expected” buying by passive funds that track indices after SpaceX was added to the Nasdaq 100 index last month.
Another question for investors is whether Musk could merge SpaceX with Tesla after previously consolidating parts of his business empire. Musk said on Tesla’s earnings call last month that the electric-car maker was increasingly collaborating with SpaceX, including through Terafab, a semiconductor manufacturing initiative.
He added that any merger would need to take place under the “appropriate process.” For now, the immediate market issue is simpler: SpaceX has shown fast revenue growth, but it has also shown investors how expensive its AI infrastructure ambitions may become.