SpaceX (SPCX) fell 9.14% on Thursday, Oct. 22, as concerns over AI funding needs and uncertainty surrounding a potential Tesla merger weighed on the shares.
Higher oil prices are fanning inflation worries that could lift interest rates and borrowing costs. The tighter funding environment hits the AI industry directly, particularly companies actually building the massive data centers powering the sector, a group that includes SpaceX.
Third-quarter results released Oct. 20 show the scale of the spend. Revenue reached $14.6 billion, up 161% year over year, while management guided fourth-quarter capital expenditure to $35 billion to $40 billion, nearly double the third quarter’s $19.6 billion. With free cash flow negative after operating expenses and capital investment, the company will likely need to borrow more to fund the expansion.
The merger overhang adds a second pressure point. Reuters reported Thursday that some participants in the Tesla talks worry Musk’s public endorsement of a combination would draw unwanted scrutiny and possible delays, while others believe Tesla’s current business state makes any merger a net negative for SpaceX shareholders. The talks remain preliminary and no terms have been set, leaving the cost of the AI build-out and an unclear combination path hanging over investors at once.
Growth itself has accelerated. Revenue came in at $4.7 billion, $7.8 billion and $14.6 billion across the first three quarters of 2026, with sequential growth rising from 66% to 87%. Most of the gain sits in the super intelligence segment, SpaceX’s AI unit that rents out computing capacity and sells proprietary models and software. Segment revenue nearly tripled from $2.6 billion in Q2 to $7.6 billion, including $608 million from coding-software company Cursor acquired in August, and the unit now accounts for more than half of company sales. Excluding Cursor, total revenue still grew about 79% from Q2.
The profit lines turned. Operating income reached $2.8 billion, against a year-ago loss of $273 million and a Q2 loss of $143 million. Net income stood at $4.4 billion versus a year-earlier loss of $1.1 billion, helped by roughly $1 billion of other income and a $390 million tax benefit.
The valuation bridge has shifted sharply. Ahead of the report, the stock traded at more than 80 times trailing sales of about $23 billion for the 12 months through June. Swapping a $5.6 billion quarter in 2025 for $14.6 billion lifts trailing revenue to about $32 billion; even at the after-hours price of roughly $160 and a roughly $2.2 trillion market value, the multiple sits near 68 times sales.
Management guided Q1 2027 company revenue to $33 billion to $37 billion. Landing in that range implies annualized revenue of $132 billion to $148 billion, or roughly 15 to 16 times sales. The target is not a stretch on its own terms: reaching $33 billion or more two quarters after a $14.6 billion quarter requires 50% to 60% sequential growth each quarter, below the 87% just posted.
Several assumptions sit underneath that multiple. Compute is rented near spot-market prices rather than locked in long-term contracts; short-term renewals are pricing higher, but spot-linked revenue could fall as quickly as it climbed if scarcity fades. Of a $63 billion backlog, only about $42 billion is expected to convert to revenue over the next year, leaving much of the guided growth uncommitted by contracts. Cash and marketable securities fell to roughly $90 billion on Sept. 30 from $100 billion on June 30, with the Q4 spending plan alone consuming 40% to 45% of that balance.
The view that follows: SPCX still looks expensive, but far less so than before the report. At 15 to 16 times annualized guided sales, the price no longer assumes an outlandish outcome, provided Q1 lands in the range, compute prices hold, and more than $80 billion of full-year capital spending pays off quickly. Until a full quarter falls inside the guided range, buying at the current price still waits for verification.
