SpaceX swings to $4.4B profit as AI becomes over half of revenue, Musk floats Tesla merger
What's the deal? SpaceX reported a $4.4 billion third-quarter profit, a sharp reversal from a $1.1 billion loss a year earlier, as chief executive officer Elon Musk said a merger with Tesla is "a good idea." Both companies have formed independent committees to examine a possible deal.
What's driving the numbers? Revenue rose 161% year on year to $14.6 billion, well ahead of the $12.72 billion analysts expected according to LSEG data. Revenue from SI (the segment formerly reported as AI) jumped to $7.6 billion from $813 million a year earlier, now 52% of the total and SpaceX's largest sales line, driven by new cloud services agreements, the Cursor acquisition and Grok adoption. Connectivity (Starlink) grew 69% to $5.2 billion, with 13.6 million consumer subscribers. The Space segment, which includes rockets and launches, grew just 6% to $1.8 billion, around 12% of revenue, and posted a $7 million operating loss.
Where is the money going? Capital spending nearly tripled to $19.6 billion, of which $16.4 billion went into the SI segment. SpaceX's nameplate compute reached 1.7 GW at the end of September.
How big is the build-out? On the earnings call Musk said SpaceX is tracking to bring roughly 200,000 Nvidia GB300 chips online per month for the rest of 2026, with next year primarily Vera Rubin compute, and plans a 440,000-chip Vera Rubin training cluster by the end of the second quarter of 2027. He expects about 3 GW of compute online by the end of 2026 and is "fairly confident" of adding another 10 GW in 2027, taking total nameplate capacity to around 13 GW, backed by an incremental 20 GW of power and cooling infrastructure so electricity doesn't become the bottleneck; he sees a non-zero chance of passing 20 GW by the end of 2027. Musk put SpaceX's annualised recurring revenue at $500 billion to $1 trillion by the end of 2027, and CFO Bret Johnsen said new compute deployments are currently paying back in under a year.
The investor view: In a CNBC Squawk Box interview on 21 October 2026, Altimeter Capital founder Brad GerstnerDealroom has a profile for this one. Try Dealroom →, who holds shares in both SpaceX and Tesla, noted that 200,000 GB300s a month is what SpaceX was installing in a whole year only months earlier. With around 43 GW of new US compute forecast for 2027 (SemiAnalysis), SpaceX alone would account for roughly a quarter, a build-out he estimates will need about $400 billion of financing. He argued that scale in capital, compute and data decides the race to superintelligence: subscale neoclouds such as CoreWeave face tougher financing markets, while SpaceX runs almost entirely on Nvidia GPUs, which lenders find easier to underwrite than custom ASICs because they are fungible.
Why merge with Tesla? Gerstner sees cheaper capital as a main motive: a combined company could borrow and raise money more cheaply to fund the capital spending ahead. Control premiums are usually 20-30%, but he expects Tesla's special committee to go above 30% to guard against shareholder lawsuits, given Musk sits on both sides of the deal, and put his best guess for the deal price at roughly $420 to $520-550 a share.
Starlink versus the carriers: Gerstner pointed to AT&T shares falling after a solid quarter on 21 October 2026 as the market pricing a higher probability that SpaceX becomes an alternative mobile carrier, rather than certainty of a takeover. He expects fast adoption, dismissed the carriers' physical-constraint arguments as a classic innovator's dilemma, and said Starlink's free cash flow will help fund SpaceX's AI ambitions.
Why now? The merger talk has moved past months of speculation into formal review. Still, no terms are agreed, and Musk says a deal is not certain.
What's the endgame? The earnings mark SpaceX's shift from a launch business into an AI and infrastructure company. A combination with Tesla would bring two of Musk's biggest ventures under one roof.
What could go wrong? Any deal faces a steep governance test. Musk is recused from the committee discussions, and Tesla would need backing from a majority of all outstanding shares.
The signal: SpaceX's profit swing shows how far AI has reshaped its revenue mix, outpacing the launch business that built it. Whether that transformation justifies merging with Tesla will hinge on valuation, conflict-of-interest, and shareholder scrutiny — none of it settled yet.
Image credit: AI-generated
Read more: SpaceX Q3 results (SEC) · Earnings call transcript · CNBC Squawk Box with Brad Gerstner (YouTube) · Brad Gerstner clip (X) · MarketWatch · Yahoo Finance · Axios · The Wall Street Journal · CNBC · Bloomberg · The Verge
