AI Propels SpaceX to New Heights
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International Markets - Technical Analysis
The two leading U.S. indices have broken their upward trend that had lasted for months, so from a technical perspective, a downward trend remains visible. There is still room for prices to fall, so opening long positions seems early at this point. The Russell 2000 had already signaled significant weakness earlier. Although some buying pressure is currently observable, which could lead to a corrective rally, this appears to be more of a temporary rebound than the start of a sustained uptrend. Following their corrections, the DAX and Stoxx 600 indices also appear to be turning downward again, so the formation of new swing lows cannot be ruled out for them either. The index tracking emerging markets has not yet been able to demonstrate any significant buying momentum, so there is still some room here for further weakness.
Chemical Giant's Chart Signals a Potential Turnaround
Major U.S. indices have broken their longer-term uptrends, triggering a significant market correction. Despite this, there are always stocks that exhibit relative strength and may be able to move against the prevailing market direction. This week, one of the standout names was Dow Inc., which ranked among the strongest performers. The company is one of the world's leading players in the chemical industry.
SpaceX delivered a quarter that far exceeded expectations. Revenue from the AI segment increased ninefold, while growth at Starlink continued to be accompanied by high profitability. However, the rapid expansion also entails exceptionally heavy investment requirements. Capital expenditure reached USD 20 billion in the third quarter and could double in Q4, while next year the company’s investment spending may rise to levels comparable with those of the major hyperscalers. Investors nevertheless welcomed the results, sending the share price sharply higher.
SpaceX reported exceptionally strong growth figures for the previous quarter, so it was hardly surprising that the share price jumped by more than 8 percent. The AI business is scaling much faster than previously expected, while Starlink continues to generate high profitability. Net income exceeded expectations by 134 percent. After reporting a USD 1 billion loss a year earlier, the company generated a USD 4.4 billion profit in the latest quarter. Revenue also came in above expectations across all three business segments.
AI
Revenue in the AI segment surged to USD 7.56 billion, representing a ninefold increase year over year and almost three times the USD 2.56 billion recorded in the second quarter. The segment generated operating income of USD 431 million, compared with an operating loss of USD 1.72 billion a year earlier.
The rapid growth was driven by the commissioning of new computing capacity and the successful sale of that capacity to companies such as Anthropic and Google. The acquisition of Cursor in August also contributed to the strong performance.
According to management, newly commissioned computing capacity may have a return period of less than one year, which could justify the company’s aggressive investment programme. However, USD 16.4 billion of the USD 19.6 billion in third-quarter capital expenditure was related to AI infrastructure. Capital expenditure was more than twice the segment’s adjusted EBITDA, indicating substantial negative free cash flow.
Connectivity
Revenue in the connectivity segment increased by 69 percent to USD 5.25 billion, exceeding analysts’ expectations by 8 percent. Operating income of USD 2.37 billion translated into an operating margin of 45 percent, confirming that Starlink remains SpaceX’s most stable business segment. The number of residential subscribers increased to 13.6 million, while average monthly revenue per subscriber rose to USD 69.
Demand from airlines was strong during the quarter, and the company also secured government orders. The number of Starlink Mobile subscribers increased to 22 million. This is an important development for the adoption of satellite-based mobile services, as the business could eventually provide the company with an additional revenue stream. For the time being, SpaceX provides this service in partnership with mobile network operators. However, the company’s recent spectrum acquisition suggests that it may eventually seek to compete directly with the major telecommunications companies.
Space
Revenue in the space operations segment increased by 6 percent to USD 1.77 billion. The business reported an operating loss of USD 7 million, although this still represented a significant improvement from the USD 542 million loss recorded in the second quarter. SpaceX completed 35 rocket launches during the quarter.
The next major milestone could be the 15th Starship test flight, during which the company may attempt to catch both of the launch vehicle. This could be followed in early 2027 by the first orbital propellant-transfer demonstration. The latter would represent a critical milestone not only for NASA’s lunar programme and longer-distance missions, but also for the long-term operational viability of Starship.
What is the cost of growth?
Management expects capital expenditure of USD 35 billion to USD 40 billion in the fourth quarter. Even the lower end of this range would be almost twice the amount invested in the third quarter. Furthermore, SpaceX must simultaneously finance data centres, next-generation satellites, the Starship programme and spectrum acquisitions. The company’s total investment spending could rise next year to levels comparable with those of the major hyperscalers. Internal funding is unlikely to be sufficient to cover these requirements, potentially leading to further bond issuance.
Management guided for revenue of USD 33 billion to USD 37 billion in the first quarter of 2027, far above the previous market expectation of approximately USD 22 billion. During the post-earnings call, Elon Musk confirmed that a potential merger between SpaceX and Tesla remains under consideration. He noted that the decision was not his to make, although he would naturally support such a transaction. The combined value of the two companies would approach USD 3.5 trillion, making it the largest corporate merger in history. The news drove not only SpaceX shares higher, but also supported the share price of Tesla.
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