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SpaceX’s AI Business Beats Expectations as Profit Hits $4.4 Billion

Third-quarter net income reached $4.4 billion, and AI now accounts for 52% of the company’s income, according to its regulatory filing

By AXY AI Desk ·

SpaceX’s AI Business Beats Expectations as Profit Hits $4.4 Billion

Key points

SpaceX said its artificial intelligence business beat investor expectations in the third quarter, helping the company post net income of $4.4 billion. According to its regulatory filing on Tuesday, the company’s data centers and Grok agents were more profitable than investors had expected. AI now makes up 52% of the company’s income.

The results show a company moving away from its roots. SpaceX became known for building rockets and running Starlink, its satellite internet network. Now its chief executive, Elon Musk, is pushing the company toward artificial intelligence, and the latest numbers suggest that bet is paying off for now.

The filing reported $14.6 billion in third-quarter revenue. The company said growth came from every segment, but the biggest gain came from the business line it renamed ‘Super Intelligence.’ That unit generated $7.5 billion in revenue from three main sources: the recently acquired Cursor coding tool, the Grok bot, and a neocloud business that the company described as its most important growth area.

What is driving the AI business

Cursor is an AI tool that helps software developers write and fix code. SpaceX bought it recently, and the acquisition shows up in both revenue and costs. Grok is the name of the company’s AI bot, which it offers to users and businesses.

The neocloud business is the one that matters most to analysts watching the company’s long-term strategy. A neocloud is a cloud computing provider built mainly to rent out the powerful computers that train and run AI models. Customers pay for that computing capacity instead of buying their own hardware. SpaceX said this business now has 1.7 gigawatts of compute. A gigawatt is a unit of power, and in this context it describes how much electricity-hungry computing capacity the company has in place or under its control. The bigger that number, the more AI work the company can handle at once.

The AI business earned $431 million in profit. That figure would have been higher without $1.2 billion in one-time stock-based compensation expenses tied to the Cursor acquisition. Stock-based compensation means paying employees with company shares rather than cash. The company records the value of those shares as an expense, which reduces reported profit even though no cash leaves the business at that moment.

The gap between $7.5 billion in AI revenue and $431 million in AI profit is large. Part of that gap comes from the one-time charge. The rest is a question investors will likely keep asking as the company spends heavily to build out its computing capacity.

Bitcoin and related-party income lifted revenue

Not all of the top-line growth came from AI customers. According to the company, about $1 billion of its revenue came from the recovery in Bitcoin prices. Bitcoin is a cryptocurrency, and its value rises and falls sharply. A rebound in its price can add paper gains or income to a company that holds it.

The filing also pointed to unspecified related-party income that might be attributed to a SpaceX investment in another company. Related-party income generally means money that comes from a business connected to the company reporting it. The source material does not say which company was involved or how large that income was.

This matters because one-time or non-operating gains can make a quarter look stronger than the core business really is. Investors usually try to separate the money a company earns from its main operations from money that comes from investments or market swings. Analysts are likely to focus on how much of the revenue growth repeats in future quarters.

Heavy spending on data centers and rockets

SpaceX spent $19.6 billion on capital expenditures in the quarter. Capital expenditures, often called capex, are funds used to buy or build long-lived assets such as buildings, equipment and infrastructure. For SpaceX, that spending is going into several large projects at once.

The most visible is Colossus II, a second data center project. The company is also increasing investment in Starship, its heavy-lift rocket. Musk has said Starship is vital to deploying a new generation of Starlink satellites and to developing orbital data centers, which would place computing equipment in space.

CFO Bret Johnsen said the company expects to spend $35 billion to $40 billion on new capital investments in the fourth quarter. That would be close to double the third-quarter figure. If the company meets that plan, its cash needs will rise sharply, and the returns from these projects will have to arrive quickly enough to justify the cost.

Musk on power, cooling and turbines

During a live-streamed discussion of the results with investors, Musk said he was spending four days a week in Memphis, Tennessee, where Colossus II is located. He said he was working to bring the data center online.

Musk argued that the main limit on deploying super intelligence is not chips. He said it is power, cooling and infrastructure. In his view, the company’s advantage lies in building that support equipment faster than anyone else. He said he had tasked a team of SpaceX engineers with solving that problem. He compared the company’s position with a rival field, saying, “This is a bit like the New York Yankees playing in Little League. It’s not fair, but the net result is being able to deploy power cooling infrastructure at a rate that is vastly faster than any anyone else.”

He gave one example. Manufacturers of turbines used to power data centers are facing delays of 12 to 18 months to obtain the metal blades and vanes those machines need. SpaceX is now using metal casting capabilities it developed for its rockets to make those components itself, which Musk said allows it to get turbines more quickly.

For people who live near large data centers, power and cooling are not abstract issues. Large facilities can draw significant electricity and need large volumes of water or other cooling systems. The source material does not say how Colossus II will affect local power supplies or residents in Memphis, but the scale of the company’s power plans is likely to draw attention from local officials and neighbors as construction continues.

Starship test and Starlink growth

Musk said the next test flight of Starship is expected in November. In that flight, SpaceX will try to recover both the first-stage booster and the second stage. Recovering both parts of the vehicle would be a “massive technology milestone,” he said. He added that the true milestone would be flying both stages again.

Starlink also continued to grow. The company said the network reached 13.6 million consumers. Musk predicted that the growth of AI agents, which are software programs that carry out tasks on their own, would lead to more demand for connectivity. In that case, the same satellite network that made SpaceX known to consumers could become more important as AI systems need to reach people and machines in more places.

What to watch next

Several things will show whether the quarter reflects lasting strength. The first is whether Colossus II comes online on the schedule Musk described. The second is whether the company can meet its plan to spend $35 billion to $40 billion in the fourth quarter without straining its finances. The third is the November Starship test, especially whether SpaceX can recover both stages.

Investors will also look for how much of the revenue growth comes from recurring AI customers and how much came from the Bitcoin rebound and related-party income. The company has not said how large or repeatable those other sources will be. Future filings will likely answer that question, and they may also show how the Cursor acquisition affects costs over time.

Questions and answers

Why did SpaceX’s AI business beat expectations?

According to the company’s regulatory filing, its data centers and Grok agents were more profitable than investors expected. The Super Intelligence unit generated $7.5 billion in revenue from the Cursor coding tool, the Grok bot and its neocloud business.

How much profit did SpaceX’s AI business make?

The AI business generated $431 million in profit. That figure would have been higher without a $1.2 billion one-time stock-based compensation expense related to the Cursor acquisition.

What is SpaceX spending money on?

SpaceX spent $19.6 billion on capital expenditures in the third quarter. It is building out Colossus II, a second data center project, and investing in Starship. The CFO said the company expects to spend $35 billion to $40 billion on new capital investments in the fourth quarter.

What is next for SpaceX’s Starship program?

Musk said the next Starship test flight is expected in November. SpaceX will attempt to recover both the first-stage booster and the second stage during that flight.

Topics: SpaceX, Elon Musk, Grok, Cursor, Starlink, Starship, Colossus II, AI data centers

Sources: TechCrunch AI

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