Earnings Special: SpaceX Profit Beats Estimates on Big Jump in AI Revenue

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SPEAKER_3 (0:18)

We did see that their quarter revenue for SpaceX came in at about $14.58 billion, topping expectations of $12.87 billion. We're seeing a bit of a reaction in the stock.

Talk to us about what you're taking away from what you're seeing thus far.

Ed Ludlow (0:33)

Yeah.

Well, the net income number is a lot higher than we thought. A lot of people went into this print saying, okay, SpaceX has a very high capital expenditure story. Capital expenditures in the quarter came in at $19.6 billion, which was pretty much in line, 19.59 instead of 19.6. Then you scroll down and you're like, net income, $4.4 billion.

The estimate was for 1.8. This is their first quarter. Again, they were only had two quarters as a public company. They're reporting for the second time, but they are reporting profit basically on an EPS basis, 35 cents a share, ahead of the estimates, 15 cents a share. And a lot of people ask me a really simple question. I'm not an accounting expert, by the way, nor am I an analyst. I'm a reporter. But capital expenditures, a big bulk of that gets depreciated over a longer time horizon. And that answers, it's purely accounting, how you could have capex at that level and still see them massively outperform on their income, with revenues also outperforming on the top line against those different segments that they have, AI connectivity and space.

SPEAKER_5 (1:41)

What about Tesla, SpaceX, the merger, if, when? I guess it's not if, right? It really is when at this point. And I'm wondering, I don't see any headlines regarding that. I'd have to imagine Elon Musk will be asked about it during the call.

Ed Ludlow (1:55)

I mean, they have issued a press release so far, right? And the press release has the numbers in it.

What SpaceX does, very similar to what Tesla does, is they offer retail investors the chance to submit questions in advance of the earnings call. And they dedicate a portion of the earnings call to those retail investors. And how it works is it's a forum.

And then registered retail investors get to upvote the questions they're most interested in.

By the time I ran to set to talk to you guys, when will SpaceX merge with Tesla was question number two by votes. That happened last quarter as well. But IR, Investor Relations, did not put that question in front of management. And sell-side analysts who participate in the call, as is traditional, did not ask. Different to Tesla's last quarterly earnings call, where a brave sell-side analyst just asked Elon outright. And Elon Musk had some prepared remarks about it, saying that the companies work close together, but that wasn't the appropriate forum to discuss it. So the answer in short is we don't know. But I just wanted to lay out the state of play, which is the market thing is going to happen imminently. And it's just whether or not it gets put in front of management as a question today through those two mechanisms.

SPEAKER_3 (3:10)

Yeah. And just kind of building off of that, we know that SpaceX has become the main driver of Elon Musk's wealth, since his IPO and now makes up more than three quarters of his net worth, actually according to the Bloomberg Billionaires Index, so really helping make him the world's first trillionaire. How do you think about the focus, the split really when you're an investor, maybe in SpaceX or Tesla, how do you think about the split in Elon Musk's focus between these companies?

Ed Ludlow (3:37)

So far, it's not been a concern. If you look at the disclosures, risk disclosures in the annual regulatory filings that both companies put out, Elon Musk's centrality to the future of both SpaceX and Tesla has been codified for quite some time. The question does come up from time to time in more ad hoc settings. But then the other thing to remind yourself of, and this was very evident in last quarter's SpaceX earnings call, its first ever earnings call, is that there are at least two, but many more very competent executives at SpaceX. Gwynne Shotwell, the president and COO, Brett Johnson, the CFO, they are very hands-on present. Gwynne Shotwell spent a lot of the time speaking about SpaceX's ambitions in telecommunications, right? Direct to cell connectivity, something that rocked the carriers. If you remember, she said explicitly, we are going to try and take customers from T-Mobile, Verizon, AT&T, and those stocks fell as a result. That was during last quarter's call. And so, Elon Musk lets those operators do their thing.