Space Exploration Technologies Corp. (NASDAQ:SPCX) reported its third-quarter earnings after the market closed on Oct. 20, with results that largely topped Wall Street estimates.
Here are the key numbers:
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Revenue: $14.6 billion (up 161% year over year)
Net Income: $4.4 billion (up from a $1.1 billion net loss)
Wall Street analysts, on average, had been expecting roughly $12.8 billion in revenue, net income of $2 billion, and adjusted EBITDA of roughly $6.8 billion, according to S&P Global Market Intelligence.
Shares of SpaceX climbed nearly 5% in after-hours trading as of 5:56 p.m. ET. CEO Elon Musk also addressed analysts on a conference call after the earnings release and gave investors great news.
Image source: The White House.
Musk sees annual recurring revenue and compute soaring in 2027
All three of SpaceX’s business segments beat Wall Street expectations, with the Super Intelligence (SI) unit posting revenue of over $7.5 billion, beating Wall Street consensus estimates by over $1 billion.
SpaceX’s low-Earth-orbit satellite internet service, Starlink, saw its subscriber base grow by 1.6 million from the second quarter to 13.6 million at the end of the third quarter. Meanwhile, average revenue per user (ARPU) grew by $3 from the previous quarter to $69 at the end of the third quarter.
During the quarter, SpaceX reported total capital expenditures of nearly $19.6 billion, with $16.4 billion allocated to the Super Intelligence unit. Wall Street analysts had forecast nearly $18.7 billion in total capex for the quarter.
Musk also touched on Grok, SpaceX’s large language model.
“We’re seeing the fastest growth of a product that I’ve ever seen in my life. I’ve never seen anything grow this fast,” said Musk during SpaceX’s earnings call, adding that Grok will soon be widely rolled out to enterprise customers. “I think Grok bot may end up being what uses most of our Super Intelligence’s compute.”
But perhaps the best news Musk gave investors was guidance on annual recurring revenue and total compute capacity for 2027.
At the end of the third quarter, SpaceX’s current data center footprint already provided 1.7 gigawatts (GW) of AI compute capacity. By the end of the year, Musk expects the company to have 2.5-3 GW of total compute.
In 2027, Musk said he feels confident the company will bring another 10 GW of incremental compute online, and that there’s even a small chance of having 20 GW of compute online by the end of 2027.
Musk also told investors he expects SpaceX to reach an annual recurring revenue (ARR) run rate of $500 billion to $1 trillion by the end of 2027.
A good quarter, but Musk is likely over-promising
There’s certainly a lot to digest from the earnings call.
Ultimately, I thought the quarter was impressive. SpaceX handily beat Wall Street estimates on all of the key numbers. The fact that SpaceX’s capex came in less than $1 billion above estimates is also solid, considering how capital-intensive the business is.
So while the quarterly results and Musk’s incredible forward guidance were all good news, I would continue to caution investors from reading too much into the forward guidance at this time.
Even adding 10 GW of incremental compute and bringing it online next year would be an absolutely herculean effort.
Furthermore, with $14.6 billion of revenue in the third quarter, that’s equal to ARR of $58.4 billion, meaning Musk is implying that ARR will, at the very least, increase by 8.5-fold in 15 months.
Investors should also keep in mind that capex will continue to rise significantly as SpaceX pursues its ambitions, which will likely weigh on the balance sheet and may lead to shareholder dilution.
Musk is known for overpromising on guidance and setting accelerated timelines that rarely pan out, so I would caution investors against giving this guidance too much weight right now.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
