【TMGM Financial Recap】AI Revenue Overtakes Starlink for the First Time as SpaceX Reports First Profit Since IPO! Musk Confirms Both Companies Have Set Up Special Committees to Explore a Merger

A changing revenue mix accompanied SpaceX’s first profit, as the renamed “Superintelligence” business overtook launches and communications combined for the first time, generating $7.56 billion in revenue. Merger discussions added to the day’s developments: on the earnings call, Musk confirmed that SpaceX and Tesla had set up separate special committees to examine a combination. Together, the companies were valued at approximately $3.5 trillion. The composition of earnings also merits attention, with around $1.6 billion of the $4.4 billion net profit coming from outside core operations.

What Drove the First Profitable Quarter Since Listing?

At $14.58 billion, SpaceX’s third-quarter revenue exceeded analysts’ expectations by 14% and increased 161% year on year. Net profit of $4.4 billion compared with an expected $1.88 billion, while earnings per share came in at $0.35 against expectations of $0.15. Adjusted EBITDA reached $8.81 billion, a year-on-year increase of 306%.

Since its listing on 12 June, SpaceX had not previously reported a profitable quarter. Second-quarter revenue stood at $7.81 billion alongside a $541 million net loss, while the corresponding quarter last year produced a net loss of $1.05 billion. Following an operating loss in the second quarter, operating profit rose to $2.79 billion, giving an operating margin of approximately 19%. Three businesses contributed to revenue: launches brought in $1.77 billion and communications, including Starlink, delivered $5.25 billion. The other $7.56 billion came from the segment renamed earlier this year as “Superintelligence.”

How Does Computing Capacity Rental Generate Half of Revenue?

For the first time, revenue from “Superintelligence” surpassed the combined total from launches and communications. Its $7.56 billion revenue represented growth of 830% year on year and 195% quarter on quarter. Rather than model sales, computing capacity rentals account for this income. Under an agreement signed in May, Anthropic will pay nearly $45 billion over three years for access to SpaceX’s Colossus data centre. Google subsequently agreed in June to monthly payments of $920 million beginning in October, with its contract extending through June 2029.

A further $608 million came from Cursor, the coding tool included in SpaceX’s consolidated financial statements from 14 August. Even without that consolidation contribution, infrastructure and solutions revenue amounted to $6.414 billion, increasing 192% quarter on quarter. The expansion therefore did not depend entirely on acquisitions.

Computing capacity in operation has expanded to 1.7 gigawatts from 0.6 gigawatts a year earlier, increasing the installed capacity behind these agreements. Multi-year contracts secure a portion of revenue, although whether that revenue translates into profit is a different question.

What Underpins the $4.4 Billion Net Profit?

Most of the operating profit across the three businesses came from communications, which includes Starlink. The segment reported $2.367 billion in operating profit on revenue of $5.248 billion, with revenue rising 69% year on year. Its subscriber base increased by 1.6 million quarter on quarter to 13.6 million. As the business continued to cut prices to attract subscribers, average monthly revenue per user declined to $69 from $83 a year earlier.

Operating profit at “Superintelligence” was only $431 million after including approximately $1.2 billion in share-based compensation associated with the Cursor acquisition. Without that charge, operating profit stood at approximately $1.6 billion. Across 35 third-quarter launches, the launch business reported an operating loss of $7 million. Although Starship completed its first flight to generate revenue, deploying 26 next-generation Starlink satellites into orbit, the launch business remains short of an operating profit.

Net profit of $4.4 billion exceeded the three segments’ combined operating profit of $2.79 billion by $1.61 billion. Other income, net interest and income tax benefits made up that gap, representing 37% of net profit. Of the $1.03 billion in other income, $561 million involved related parties that were not identified in the financial report.

Free cash flow remained negative as third-quarter capital expenditure climbed to $19.59 billion, almost three times its year-earlier level. AI infrastructure accounted for $16.44 billion of that investment. A structure combining $4.4 billion in profit with $19.59 billion in capital expenditure needs a path forward; Musk’s proposed route is a merger.

Can a $3.5 Trillion Merger Clear the Voting Threshold?

Separate special committees of independent directors are examining a merger at SpaceX and Tesla, Musk confirmed on the call. Because he heads both businesses and has a conflict of interest, he is staying out of those discussions. A transaction involving the companies, whose combined market capitalisation is approximately $3.5 trillion, would become the largest corporate merger in history if completed. Barclays anticipates an all-stock deal with SpaceX buying Tesla, and a possible announcement before Tesla’s annual shareholder meeting on 3 December.

Securing approval at Tesla is the obstacle. According to Musk, votes in favour must account for 50% of all Tesla shares, not merely a majority of those represented at the meeting, a requirement he described as “a fairly high bar.” His share of voting power is only around 20% at Tesla, against 82% at SpaceX. No merger proposal appears in the proxy materials for the 3 December shareholder meeting. Commercial ties already connect the companies: hundreds of millions of dollars’ worth of Cybertrucks have been bought by SpaceX, while xAI, merged into SpaceX in February, is a major buyer of Tesla’s energy storage batteries. The companies are also developing the Terafab chip plant together in Texas.

On the call, Musk identified robotics, chip design and superintelligence software as areas of synergy. Electricity, however, provides the underlying link. As Musk himself explained, power, cooling and infrastructure impose greater constraints on superintelligence than chips do.

Which Three Dates Deserve Attention?

The largest lock-up release since the June IPO is scheduled for 22 October, when up to 1.3 billion SpaceX shares become available. This represents 28% of the main pool of approximately 4.7 billion locked-up shares. A further 328 million shares are due for release on 24 October. Tesla’s third-quarter results arrive after the U.S. market closes on 21 October, and the merger is certain to feature on its earnings call. Voting at Tesla’s shareholder meeting follows on 3 December.

Ambitions for next year have already been scaled up by management. Against analysts’ expectations of $22.2 billion, CFO Johnson projects first-quarter revenue next year of $33 billion to $37 billion, with capital expenditure also set to increase further. Musk’s own projection puts SpaceX’s annual recurring revenue at $500 billion to $1 trillion by the end of 2027, alongside 10 gigawatts of computing capacity coming online in 2027. No institution has included that figure in its model. For Musk, it provides the rationale for insisting that both businesses should sit within a single company.