SpaceX's First Earnings Report Beats Expectations, but Shares Drop Over 7% After Hours on Lockup Pressure

Original author: SoSoValue Research

SpaceX released its first quarterly report after its IPO. Aside from Starlink subscriber numbers slightly missing market expectations, the company's revenue, adjusted EBITDA, and loss per share all significantly beat expectations. Revenue grew across all three business segments—AI, Connectivity, and Space—while overall operating losses narrowed sharply.

This report further confirms that SpaceX is evolving from a rocket and satellite internet company into a comprehensive platform encompassing space transportation, global communications, AI compute infrastructure, and large model applications. Starlink remains the current profit core, AI has become the fastest-growing business, and Starship will determine the ceiling for future satellite deployment costs and network capacity.

Overall Results Beat Expectations, Losses Narrow Significantly

SpaceX reported Q2 revenue of $7.814 billion, up 92% year-over-year and above the market expectation of approximately $6.8 billion. Adjusted EBITDA reached $3.538 billion, up 191% year-over-year and significantly exceeding the market expectation of around $2 billion.

The net loss narrowed from $1.008 billion in the same period last year to $541 million, a decline of approximately 46%. The loss per share was $0.09, better than the market-expected loss of $0.24 to $0.25. Operating losses narrowed from $970 million to $143 million, indicating that rapid revenue expansion is beginning to translate into operating leverage. SpaceX Q2 Report

From a revenue structure perspective, the Connectivity business contributed approximately 55%, the AI business contributed about 33%, and the traditional space business share has dropped to roughly 12%. AI revenue has for the first time reached 2.7 times the revenue of the space business, and SpaceX's valuation foundation is increasingly tilting toward Starlink and AI infrastructure.

Starlink Remains the Profit Core, V3 Opens the Next Capacity Cycle

The Connectivity business generated Q2 revenue of $4.291 billion, up 65.8% year-over-year and 31.7% quarter-over-quarter, above the market expectation of $3.88 billion. Operating profit reached $1.656 billion, up 79% year-over-year and 39.4% quarter-over-quarter, continuing to provide the group's primary profit contribution.

Starlink subscriber numbers reached 12 million, doubling year-over-year and growing approximately 16.5% quarter-over-quarter, but slightly below the market expectation of 12.2 million. Monthly average ARPU was $66, flat quarter-over-quarter but down from $85 in the same period last year. Rapid subscriber growth accompanied by declining ARPU reflects Starlink's deeper penetration into lower-priced regions and plans, though growth in enterprise, aviation, maritime, and government business is improving the revenue mix. Enterprise and government revenue grew 108% year-over-year, and the company also secured a multi-year Starshield contract with the U.S. government worth over $6 billion.

Starlink V3 is the most important business catalyst for the coming years. Management stated that each V3 satellite's capability is approximately 10 times that of V2, and the number of deployed satellites is also expected to increase by an order of magnitude, theoretically increasing overall network bandwidth capacity by roughly 100 times. Even if monetization per unit of traffic declines by 90%, Starlink revenue could still have roughly 10x growth headroom. However, this estimate is a scenario projection based on management's assumptions regarding capacity and monetization rates; the final outcome still depends on Starship launch frequency, terminal costs, spectrum resources, and regional pricing.

AI Becomes the Second Growth Engine; Compute Investment Is Quickly Converting into Revenue

The AI business generated Q2 revenue of $2.561 billion, up 247.5% year-over-year and 213.1% quarter-over-quarter, above the market expectation of $2.08 billion. This was primarily driven by compute orders from customers such as Google and Anthropic, as well as Grok and X subscription revenue.

The AI business reported an operating loss of $1.257 billion, narrowing 49% quarter-over-quarter. Adjusted EBITDA swung from a $609 million loss in Q1 to a profit of $1.146 billion, significantly better than the market's original expectation of a small loss. The company has signed cloud service agreements totaling $14.1 billion, of which $1.6 billion converted into incremental AI infrastructure revenue in Q2.

Management emphasized that the cycle from AI compute deployment to revenue generation is significantly shorter than that of traditional launch sites and satellite infrastructure, with the payback period for already-signed compute projects being less than one year. This means SpaceX can rely on pre-signed orders and confirmed customer demand to recover capital relatively quickly once equipment is deployed, and then reinvest in the next round of expansion.

However, the "payback period of less than one year" primarily reflects the project-level economics of specific compute contracts and equipment. The AI business still recorded a $1.257 billion operating loss under GAAP, with Q2 depreciation and amortization reaching $1.885 billion and R&D investment at $2.178 billion. Therefore, while improved project payback speed has been demonstrated, the AI business's overall free cash flow and long-term profit margins still require additional quarters of data to confirm.

High Capex Is Backed by Orders; Cash Flow Remains the Core of Valuation

Total capital expenditure in Q2 was $18.369 billion, slightly below the market expectation of $18.58 billion, but up approximately 550% year-over-year and 82% quarter-over-quarter. AI Capex alone reached $15.828 billion, accounting for roughly 86% of total capital expenditure, up about 105% quarter-over-quarter and above the market expectation of $13.09 billion.

In the first half of the year, SpaceX generated $3.466 billion in operating cash flow, while capital expenditure reached $28.476 billion, resulting in simple free cash flow of approximately negative $25 billion. Management expects Capex to remain roughly at current levels for at least the next two quarters, implying more than $36 billion in additional spending in the second half of the year.

The company holds approximately $100 billion in cash, cash equivalents, and marketable securities, along with $47.5 billion in orders. The $85.7 billion in net proceeds from the IPO and $25 billion in bond financing provide ample buffer for expansion, with limited short-term financing risk. Whether future valuation can continue to expand depends mainly on the speed at which cloud service contracts convert into revenue, and whether investments in AI, Starlink, and Starship can progressively narrow the free cash flow gap.

Year-End Push Toward $100 Billion Annualized Revenue; Target Heavily Relies on AI Cloud Services

During the earnings call, management stated that the company's monthly revenue level by the end of 2026 would support a $100 billion annualized revenue run rate. In the first few weeks after Q3 began, the company has already signed approximately $6.7 billion in new cloud service revenue. The Cursor acquisition, expected to close in Q3, will also contribute incremental revenue.

This target represents an annualized revenue scale more than three times the Q2 annualized level, with growth primarily dependent on rapid delivery of AI cloud service contracts, compute coming online as scheduled, and Cursor's consolidation. As such, it is better viewed as a year-end run-rate target rather than a locked-in full-year recurring revenue figure.

SpaceX had 1.4GW of nominal compute capacity at the end of Q2, up from 1GW in Q1 and 0.4GW in the same period last year. Management plans to exceed 2GW by the end of 2026 and approach 10GW by the end of 2027. The company also disclosed a dense model release schedule: Grok 4.6 is expected next week, Grok 4.7 is expected three to four weeks thereafter, and Grok 5 is planned for release before year-end.

Exclusive Partnership with Nvidia Strengthens AI Supply Chain Demand Signal

SpaceX stated that its future AI infrastructure will exclusively adopt the Nvidia platform, with a strategic focus shifting to the Blackwell and subsequent Vera Rubin architectures. As compute scales from 1.4GW toward nearly 10GW, SpaceX could become one of Nvidia's largest single customers in the future. These remarks pushed Nvidia's stock up more than 2% in after-hours trading, while also increasing market concerns about AMD being displaced from SpaceX orders.

For the cloud computing and AI infrastructure supply chain, this report provides a positive demand signal: in a market environment where high-end GPU supply remains tight and compute contracts are locked in ahead of time, new compute capacity can generate revenue within a relatively short period, and adjusted EBITDA can improve rapidly. This benefits demand visibility across the GPU, HBM, server, network equipment, optical module, liquid cooling, and data center power supply chains.

SpaceX's model has certain unique characteristics. The company expands compute capacity based on pre-signed contracts from large customers like Google and Anthropic, resulting in high project utilization and revenue visibility. Traditional cloud computing companies also bear various costs such as developing proprietary models, internal inference workloads, enterprise migration, and general cloud services. SpaceX has demonstrated that the ROI of contracted compute projects can remain healthy and provides a positive reference for the industry, but it is not yet sufficient to cover the returns of all cloud computing capital expenditures.

Down More Than 7% After Hours; Lock-Up Expiry and High Capex Weigh on Stock

SpaceX shares closed up 9.4% at $125.33 before the earnings release, partially reflecting short covering and investors positioning ahead of the first report. The initial better-than-expected results briefly pushed the stock higher in after-hours trading, but it turned lower after the call disclosed substantial AI investments and subsequent Capex plans, falling more than 7% after hours and at one point down 8%. Market focus shifted from revenue growth to AI capital returns, free cash flow pressure, and the supply overhang from the first lock-up expiry of approximately 912 million shares on August 6.

On August 6, the first batch of approximately 912 million restricted shares of SpaceX will become eligible for sale. Based on the current share price, the potential tradable scale exceeds $100 billion. The supply pressure ahead of the lock-up expiry, combined with the 9.4% single-day gain before earnings, makes investors more inclined to reduce positions after results are out. The actual scale of selling will depend on decisions by employees and early investors, but the potential expansion of the float already constitutes a near-term valuation overhang.

From an operational perspective, Q2 revenue, profit, and loss narrowing all significantly exceeded expectations, and AI compute has begun to demonstrate its revenue conversion speed. The after-hours decline reflects more of a trading structure pressure driven by high capital expenditure and the share lock-up expiry, particularly the potential supply concerns as Thursday's unlock approaches.

SpaceX has formed a relatively clear three-tier growth structure: Starlink provides profit and cash flow, AI cloud services contribute the fastest revenue growth, and Starship provides the infrastructure for Starlink V3 and future space-based compute through lower launch costs and greater payload capacity. Going forward, key items to monitor include revenue recognition from cloud service orders, the AI business's GAAP losses and free cash flow improvement, Starship V3 deployment progress, and actual market absorption of unlocked shares.