JOSEPH DESOZE

SpaceX, the space exploration company led by Elon Musk, reported stronger-than-expected third-quarter results, driven by explosive growth in its artificial intelligence (AI) business. Originally established as a rocket launch company, SpaceX has transformed AI into its largest business segment by revenue, helping the company return to quarterly profitability.In an earnings release on Oct. 20, SpaceX reported third-quarter revenue of $14.58 billion, up 161% year on year and well above analysts' consensus estimate of $12.72 billion. Net income reached $4.404 billion, reversing a net loss of $1.054 billion in the same period last year. Operating income also swung to a profit of $2.791 billion.The biggest contributor to the improved results was SpaceX's AI division, which the company calls Super Intelligence (SI). Revenue from the segment surged 830% year on year to $7.56 billion, accounting for approximately 52% of total revenue and more than four times the $1.77 billion generated by its core space business. Growth was driven by expanded contracts to lease computing capacity to AI developers, including Anthropic and Google, as well as the acquisition of AI coding company Cursor.The Starlink satellite internet business also maintained solid growth. Revenue from the Connectivity segment rose 69% year on year to $5.25 billion, while operating income climbed 99% to $2.37 billion. As of the end of September, Starlink had 13.6 million consumer subscribers, up 89% from a year earlier. However, average monthly revenue per user (ARPU) declined from $83 in the third quarter of last year to $69 in the latest quarter, reflecting the impact of lower-priced plans introduced to support international expansion.By contrast, the Space segment, which includes rocket launches and related operations, delivered relatively modest results. Revenue increased 6% year on year to $1.77 billion, while the segment recorded an operating loss of $7 million, reflecting substantial research and development spending on the company's next-generation Starship rocket. During the quarter, SpaceX also completed Starship's first revenue-generating mission, deploying 26 next-generation Starlink satellites into orbit.The earnings announcement also brought confirmation that SpaceX and Tesla are exploring a potential merger. During the earnings conference call, Musk said the companies had established special committees within their respective boards to review the possibility. He highlighted potential synergies in software and semiconductor development, arguing that combining the two businesses could offer significant advantages. However, any merger would require shareholder approval, and Musk has been excluded from the special committee discussions because of potential conflicts of interest.SpaceX is also continuing to invest heavily in expanding its AI business. Third-quarter capital expenditure reached $19.593 billion, exceeding quarterly revenue, with approximately 84% of that amount, or $16.444 billion, allocated to the SI segment. Musk also outlined an ambitious long-term growth outlook, projecting annual recurring revenue of between $500 billion and $1 trillion by the end of 2027.
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