Revenue jumped 92%, so why did SpaceX stock fall after the report?
SpaceX's first quarterly report as a public company showed exceptional growth, a sharp decrease in losses, and continued expansion of Starlink. However, an expenditure of $18.4 billion in one quarter, mainly on artificial intelligence infrastructure, reminded investors that the path to turning Elon Musk's vision into positive cash flow is still expected to be particularly expensive.
SpaceX published its first financial report since its massive IPO in June, and on the surface, the results were much stronger than Wall Street expected. The company's revenue in the second quarter totaled $7.81 billion, a 92% jump compared to $4.07 billion in the same period last year. Market forecasts hovered around $6.8-6.9 billion, so the company beat them by nearly a billion dollars. The net loss narrowed to $541 million, or 9 cents per share, compared to a loss of just over a billion dollars last year. Adjusted EBITDA jumped 191% and reached $3.54 billion.
Despite the strong numbers, SpaceX stock fell by about 7.5% in after-hours trading, to a level of about $116. This followed a 9.4% jump during the trading day, closing at a price of $125.33. The investors' reaction illustrates that the market was not looking only for revenue growth, but primarily for proof that the company is capable of financing its ambitions without burning tens of billions of dollars annually.
SpaceX's main financial engine continues to be the connectivity business, led by Starlink. The sector's revenue reached $4.29 billion, a 66% annual increase, and accounted for more than half of the company's revenue. The sector's operating profit jumped 79% to $1.66 billion, and its adjusted EBITDA reached $2.6 billion.
The number of Starlink subscribers doubled within a year and reached 12 million, compared to 10.3 million at the end of the first quarter and only six million a year earlier. However, the average monthly revenue per subscriber fell from $85 to $66, partly due to expansion into countries where the service is sold at lower prices. The number of subscribers was also slightly lower than analysts' expectations, which stood at about 12.19 million.
A particularly strong point for Starlink was its activity with companies and governments. Revenue from corporate and government clients jumped 108% to $1.81 billion. SpaceX signed agreements with airlines including American Airlines, and expanded the service in companies such as Southwest, Virgin Atlantic, and Iberia. At the same time, the company won multi-year contracts totaling more than six billion dollars for Starshield, its secure satellite network for security and government bodies in the USA.
AI activity also showed significant growth. The AI sector's revenue, which includes xAI, the Grok model, X activity, and the company's computing infrastructure, jumped 247% and reached $2.56 billion. Of this, about $2.19 billion came from AI solutions and computing infrastructure rental, compared to only $311 million in the same quarter.
The company reported cloud service agreements with a total contract value of $14.1 billion, of which $1.6 billion has already been recognized as revenue in the quarter. The AI sector's operating loss narrowed to $1.26 billion, compared to $2.47 billion in the previous quarter, and the sector moved to a positive adjusted EBITDA of $1.15 billion.
However, this is also where the figure that troubled investors lies. SpaceX invested $15.83 billion in AI infrastructure in the quarter, more than double compared to $7.72 billion in the first quarter and more than 20 times compared to $749 million in the same period. In total, the company's capital expenditures amounted to $18.37 billion in the quarter, compared to only $2.83 billion a year earlier.
The transition of the AI sector to positive adjusted EBITDA is an achievement, but it does not eliminate setup costs. Adjusted EBITDA does not include capital expenditures, depreciation, and stock-based compensation, and therefore does not necessarily reflect the cash remaining in the coffers after building data centers and purchasing chips. In the first half of the year, SpaceX generated about $3.47 billion from current operations, but used $34.49 billion in investment activities. Capital expenditures for the half-year totaled $28.48 billion.
The company is not in immediate liquidity danger. It ended the quarter with about $93.5 billion in cash and another $6.5 billion in marketable securities. However, a large part of the amount came from the IPO, which injected about $85.7 billion into the coffers, and from an additional $25 billion bond issuance. In other words, the strong cash balance provides SpaceX with plenty of time to realize its plans, but does not yet prove that the activity itself is capable of financing the current pace of investments.
The company's traditional space activity recorded revenue of $962 million, a 29% annual increase, but remained loss-making with an operating loss of $542 million. The company continues to invest significant amounts in the development of Starship, and recorded research and development expenses of more than a billion dollars in the space sector in the quarter. SpaceX completed 38 launches in the quarter, compared to 46 in the same period, but reported progress in Starship V3 tests and the deployment of the next generation of Starlink satellites.
Elon Musk provided particularly ambitious forecasts on the investor call. According to him, SpaceX could reach an annual revenue run rate of $100 billion by the end of 2026, and the company moved up its internal forecast for annual revenue of a trillion dollars from 2031 to 2030. These are extraordinary goals, but also ones that require very rapid growth in the fields of connectivity, cloud, artificial intelligence, and space.
Even after the decline in after-hours trading, SpaceX's estimated market value remains around $1.5 trillion. Roughly calculated, this is almost 49 times the annual revenue run rate reflected in the current quarter's results. Even assuming the company meets the target of an annual revenue run rate of $100 billion, the stock is trading at around 15 times that target. This is a valuation that leaves very little room for delays, budget overruns, or a slowdown in growth.
Adding to the pressure on the stock is the end of the first lock-up period after the IPO. On August 6, about 912 million shares held by employees and early investors are expected to become eligible for sale, worth more than $100 billion at recent market prices. There is no certainty that the shares will indeed be sold, but the possibility of a significant increase in the supply of tradable shares could weigh on the price in the short term.
The report proved that SpaceX is no longer just a rocket company selling a futuristic vision to investors. Starlink is a large and profitable business, AI activity is starting to generate significant revenue, and the company holds long-term contracts with governments and corporations. However, the report also illustrated the gap between accounting growth and cash generation. The central question for investors is no longer whether SpaceX can increase revenue, but whether it will be able to turn its massive investments into cash flow that justifies a valuation of more than a trillion dollars.
The article does not constitute an investment recommendation.
