SpaceX's Big AI Spending Puts Damper on First Earnings Since IPO

**SPEAKER_1** (0:02)
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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Tim Stenovec** (0:32)
It shares a SpaceX bouncing around, but muted in the after hours, barely up by about half a percent right now. The company out with its first report as a publicly traded company, revenue exceeded Wall Street's expectations, reported $7.8 billion. The company reported an operating loss though of $1.26 billion from its AI business. That's better than the consensus expectation. Shares have plunged since that IPO, raising more than $1 trillion in market value from their peak. I think we'll hear a lot more on the call when it starts a little later.

**Carol Massar** (1:01)
One can certainly hope. All right, let's get to it with our team. We've got a great team to kind of go through the numbers and the results, and we're going to continue to kind of track as we get into the call. Mandeep Singh is with us right here in studio in our Bloomberg Interactive Broker Studio. He's Bloomberg Intelligence Global Head of Technology Research, and out there in our San Francisco News Bureau is, of course, our own Ed Ludlow, host of Bloomberg Tech.
Ed, let me just kick it off with you. What jumps out here? You're also on the live blog, but investors just reading through. Right now, the stock is down just about 1 percent here.

**Ed Ludlow** (1:32)
Yeah. I mean, overall revenue and sales came in above consensus. But you go into this saying, this was the first quarterly earnings for SpaceX since they became a public company, and it will be their first earnings call. There was a lot of acceptance that the consensus numbers out there. There was a bit of skepticism, right? They're a bit squishy because we don't have a whole lot of contemporaneous data, but it's really interesting.
The status quo is still that Starlink is the driver on the top line, and also the cash cow, but they really improve the economics of this business in the quarter of, yes, it's a rocket company, but renting compute capacity to other technology companies. That has proved to be a strong business for them. There's a lot of discussion in that, in what's a very limited earnings release.

**Tim Stenovec** (2:20)
Mandeep, I want to bring you in here. If you were to look at the three different segments, reportable segments, Ed mentioned the cash cow, and in terms of where the revenue is still coming from. In terms of growth in your view, which segment is the most important?

**Mandeep Singh** (2:35)
They reported a backlog number of 47.5 billion. That tells you most of the backlog is likely coming from AI, and what is not captured in this print is the entropic and Google deals.

**Tim Stenovec** (2:50)
Okay. That's what I was going to ask you. When you say a backlog, that means companies like entropic and Google coming to XAI, part of SpaceX and Rent and Compute?

**Mandeep Singh** (2:59)
That's right, yes. And in fact, we know some of the deal terms, entropic will be paying SpaceX about $1.25 billion a month. So next quarter when they report, there will be at least $3.75 billion from entropic, and another probably $2 billion plus from Google when they report. So $6 billion bump just from these two deals next quarter.

**Carol Massar** (3:28)
That sounds pretty impressive.

**Mandeep Singh** (3:30)
I think so. That's why that backlog number is very important, because in that $47 billion is that entropic deal and the Google deal, and there's one more company, I think, reflection.

**Tim Stenovec** (3:41)
Ed, what can XAI offer these firms that Mandeep mentioned, that like a Google Cloud, a Microsoft Azure, an AWS, or even a Neo Cloud can offer?

**Ed Ludlow** (3:55)
Space that they're not currently using.

**Kate Gulliver** (3:56)
So it's a commodity.

**Ed Ludlow** (3:59)
A little bit. So in Tennessee, XAI now, SpaceX AI set up a number of data centers in very quick order. Colossus 1, Colossus 2, and Colossus 3
What was explained to me in great detail by sources is that once they had built all of them, they were like, okay, how do we use this ourselves? And they realized that in Colossus 1, which is a big tin can data center, they had multiple generations of NVIDIA GPUs, all mixed together. Some were Hopper generation, some were Blackwell, some were even as old as the A100 generation. And so they decided the best use of that capacity was to rent it out with attractive economics for those renting it at a premium, many would say. I think Mandeep's been over that really well in the past. And for them, like they run it really operationally efficiently, it can be a high margin business. But it was all born out of the fact that for their own models and running them, not just training later generation models, they couldn't work out how to use that capacity for themselves to best effect.