【TMGM Financial Recap】SpaceX Turns Profitable for the First Time Since IPO as AI Revenue Moves Ahead of Starlink for the First Time! Special Committees Established at Both Companies to Explore a Merger, Musk Confirms

Revenue of $7.56 billion from SpaceX’s renamed “Superintelligence” division marked a change in the group’s business mix, surpassing launches and communications combined for the first time as the company reported its first profit. However, sources beyond core operations accounted for around $1.6 billion of the $4.4 billion net profit. Merger talks also came into focus that day. Speaking on the earnings call, Musk confirmed that special committees at both SpaceX and Tesla were exploring a combination of the companies, which together were valued at approximately $3.5 trillion.

SpaceX Moves Into Profit for the First Time Since Listing

A 161% year-on-year rise took SpaceX’s third-quarter revenue to $14.58 billion, beating analysts’ expectations by 14%. Against forecasts of $1.88 billion in net profit and $0.15 in earnings per share, the company reported $4.4 billion and $0.35 respectively. Adjusted EBITDA of $8.81 billion represented a 306% increase from a year earlier.

Profitability had not been achieved in any previous quarter since the 12 June listing. The second quarter brought a $541 million net loss on $7.81 billion in revenue, while the equivalent period last year recorded a $1.05 billion net loss. At the operating level, the company moved from a second-quarter loss to a $2.79 billion profit, equivalent to a margin of approximately 19%. Launches accounted for $1.77 billion of revenue and communications, including Starlink, for $5.25 billion. The remaining $7.56 billion was generated by the division given the name “Superintelligence” earlier this year.

Computing Capacity Rentals Supply Half of Revenue

With growth of 830% from a year earlier and 195% from the previous quarter, revenue at “Superintelligence” reached $7.56 billion. That put the division ahead of launches and communications combined for the first time. Renting computing capacity, not selling models, generates this revenue. In May, Anthropic committed to paying nearly $45 billion over three years to use SpaceX’s Colossus data centre. A June agreement with Google followed: payments of $920 million a month begin in October, and the contract runs through June 2029.

Since its inclusion in SpaceX’s consolidated financial statements on 14 August, coding tool Cursor has added $608 million in revenue. Stripping out the consolidation contribution still leaves infrastructure and solutions revenue of $6.414 billion, a 192% increase on the preceding quarter. Acquisitions therefore explain only part of the growth.

Supporting the contracts is a larger installed base: computing capacity already in operation now totals 1.7 gigawatts, against 0.6 gigawatts a year earlier. The multi-year terms lock in some revenue, but do not settle the separate question of profitability.

Non-Core Income Contributes to $4.4 Billion Net Profit

Within communications, including Starlink, a 69% year-on-year revenue increase delivered $5.248 billion and operating profit came to $2.367 billion. This supplied most of the operating profit generated by the three businesses. Subscriber numbers rose by 1.6 million from the previous quarter to 13.6 million. Continued price reductions aimed at attracting subscribers pushed average monthly revenue per user down to $69, compared with $83 a year before.

After approximately $1.2 billion in share-based compensation linked to the Cursor acquisition, operating profit for “Superintelligence” amounted to just $431 million. Removing that expense puts operating profit at approximately $1.6 billion. Launches, meanwhile, remained loss-making at the operating level: 35 launches in the third quarter produced an operating loss of $7 million. Starship’s first revenue-generating flight placed 26 next-generation Starlink satellites in orbit, but the launch business has still not achieved an operating profit.

The step from $2.79 billion in combined operating profit across the three divisions to $4.4 billion in net profit was accounted for by other income, net interest and income tax benefits. These contributed $1.61 billion, or 37% of net profit. Within other income of $1.03 billion, transactions involving related parties accounted for $561 million; the financial report did not identify those parties.

Free cash flow stayed negative, with capital expenditure rising to $19.59 billion in the third quarter, nearly three times the amount spent a year earlier. Of that total, $16.44 billion went towards AI infrastructure. The contrast between $4.4 billion in profit and $19.59 billion in capital expenditure leaves this financial structure needing a way forward. Musk has put forward a merger as that route.

Tesla Voting Requirement Shapes Prospects for $3.5 Trillion Merger

Independent directors are assessing a potential merger through special committees established separately by SpaceX and Tesla, Musk confirmed on the call. His leadership of both companies creates a conflict of interest, so he is taking no part in the discussions. With approximately $3.5 trillion in combined market capitalisation, the companies would complete the largest corporate merger in history if a deal went ahead. An all-stock acquisition of Tesla by SpaceX is Barclays’ expectation, with an announcement potentially preceding Tesla’s annual shareholder meeting on 3 December.

Approval by Tesla shareholders presents the difficulty. Votes representing 50% of all Tesla shares would have to support the proposal, Musk said, rather than simply a majority of the shares represented at the meeting. He called that requirement “a fairly high bar.” Against his 82% voting power at SpaceX, he controls only around 20% at Tesla. Merger approval is not included in the proxy materials for the 3 December shareholder meeting. The businesses already have commercial links. SpaceX’s purchases of Cybertrucks run into hundreds of millions of dollars, and xAI, which merged into SpaceX in February, is a major customer for Tesla’s energy storage batteries. Construction of the Terafab chip plant in Texas is also a joint undertaking by the two companies.

Although Musk cited superintelligence software, chip design and robotics as sources of synergy on the call, electricity is the substantive connection. In his own account, the constraints on superintelligence come more from power, cooling and infrastructure than from chips.

Three Dates Bring Share Releases, Results and Voting Into Focus

The lock-up on up to 1.3 billion SpaceX shares expires on 22 October. Equivalent to 28% of the main pool of approximately 4.7 billion locked-up shares, this is the biggest release since the June IPO. Another 328 million shares follow on 24 October. Tesla’s third-quarter results are due after the US market close on 21 October, with the merger certain to come up during the earnings call. The shareholder vote at Tesla’s meeting takes place on 3 December.

The ambitions management has set out for next year are already greater. First-quarter revenue is expected by CFO Johnson to reach $33 billion to $37 billion next year, substantially above the $22.2 billion anticipated by analysts, while capital expenditure is due to climb further. In Musk’s forecast, annual recurring revenue at SpaceX reaches $500 billion to $1 trillion by the end of 2027, and 10 gigawatts of computing capacity enters operation during 2027. Although no institution’s model incorporates that figure, it underpins his insistence on bringing the two businesses together within one company.