Space Exploration Technology Company. (NASDAQ: SPCX) reported its third quarter results after the market closed on October 20, with results well above Wall Street estimates.
Here are the key figures:
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Revenue: $14.6 billion (up 161% year over year)
Net profit: $4.4 billion (compared to a net loss of $1.1 billion)
Adjusted EBITDA: $8.8 billion (up 306%)
Wall Street analysts on average expected revenue of about $12.8 billion, net income of $2 billion and adjusted EBITDA of about $6.8 billion, according to S&P Global Market Intelligence.
SpaceX shares rose nearly 5% after hours as of 5:56 p.m. ET. CEO Elon Musk also spoke to analysts on a conference call after the earnings release and delivered some great news to investors.
Image source: The White House.
Musk Sees Annual Recurring Revenue and Computing Skyrocket in 2027
All three of SpaceX’s business segments beat Wall Street expectations, with the Super Intelligence (SI) unit posting revenue of more than $7.5 billion, beating Wall Street consensus estimates by more than $1 billion.
SpaceX’s low-Earth orbit satellite Internet service, Starlink, saw its subscriber base increase 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) increased 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, including $16.4 billion allocated to the Super Intelligence unit. Wall Street analysts forecast nearly $18.7 billion in total investments for the quarter.
Musk also talked about 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 that fast,” Musk said during SpaceX’s earnings conference call, adding that Grok would soon be widely deployed to enterprise customers. “I think the Grok robot could end up being the one that uses most of the computing in our Super Intelligence.”
But perhaps the best news Musk gave investors was the forecast for annual recurring revenue and total computing capacity for 2027.
At the end of the third quarter, SpaceX’s current data center footprint already provided 1.7 gigawatts (GW) of AI computing capacity. By the end of the year, Musk expects the company to have 2.5 to 3 GW of total computing.
By 2027, Musk said he was confident the company would bring an additional 10 GW of additional computing online, and that there was even a small chance of having 20 GW of computing online by the end of 2027.
Musk also told investors that he expects SpaceX to reach an annual recurring revenue (ARR) rate of between $500 billion and $1 trillion by the end of 2027.
A good quarter, but Musk is probably overpromising
There’s certainly a lot to digest from the earnings conference call.
Ultimately, I found the quarter to be impressive. SpaceX handily beat Wall Street estimates on all key numbers. The fact that SpaceX’s investments exceeded estimates by less than $1 billion is also solid, given the company’s capital intensity.
So while Elon Musk’s quarterly results and incredible forecasts were all good news, I would still caution investors against reading too much into forecasts at this time.
Even adding 10 GW of incremental computing and bringing it online next year would be an absolutely herculean effort.
Additionally, with $14.6 billion in Q3 revenue, that equates to an ARR of $58.4 billion, meaning Musk is hinting that ARR will, at the very least, grow 8.5x in 15 months.
Investors should also keep in mind that investments will continue to increase significantly as SpaceX pursues its ambitions, which will likely weigh on the balance sheet and could lead to shareholder dilution.
Musk is known for overpromising on guidance and rushing deadlines that rarely materialize. I therefore advise investors not to give too much weight to these directions at the moment.
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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 securities mentioned. The Motley Fool has a disclosure policy.
CEO Elon Musk Just Gave SpaceX Investors Some Great News, originally published by The Motley Fool
