Artificial intelligence revenue surges around 830% while capital spending on data center build-out and developing new technology continues
By Becky Peterson
SpaceX and Tesla have formed special committees to discuss a potential merger, Elon Musk said Tuesday.
"The special committees have not reached an agreement of the terms of any transaction and there is no guarantee that they will but I do think there is a lot of merit in combining the companies," Musk said Tuesday on SpaceX's quarterly earnings conference call.
Musk, who serves as chief executive of both companies, said he wasn't on either board committee evaluating a combination and that shareholders would vote on the matter.
Analysts have been speculating about the prospects of a merger between the companies as a result of their significant business ties. A deal would put the world's biggest commercial rocket launchers and satellite-internet operators, and second-largest electric-car manufacturer under one corporate umbrella at a time when Musk is reorganizing both around artificial intelligence.
The electric-car maker Tesla has a market valuation of around $1.5 trillion, and SpaceX's valuation is around $2 trillion. Even if shareholders were open to a deal, such a combination would get regulatory scrutiny based on its size, and scale.
Musk has substantial ownership stakes in both companies, along with majority voting power at SpaceX. He founded SpaceX in 2002 using money garnered from the sale of PayPal, where he was a co-founder. He joined the Tesla board through an investment in 2004 and took over as CEO of the carmaker in 2008.
He has also engineered combinations of his companies before. Earlier this year, he led the merger of his artificial-intelligence startup xAI into the bigger SpaceX. Musk was the largest shareholder in SolarCity when Tesla purchased the solar-energy company in 2016.
SpaceX shares rose more than 7% in after-hours trading. Tesla shares gained 1% after hours.
Tesla is slated to report its third-quarter financial results Wednesday.
Musk's comments came toward the end of SpaceX's quarterly earnings call in which executives said revenue more than doubled from a year earlier, and signaled more robust growth in the months ahead. Revenue reached $14.6 billion in the third quarter, jumping more than 160% from the same time last year and coming in stronger than analysts polled by FactSet had forecast.
A big driver of the increase has been from its investments in artificial intelligence, which the company expects will cement it as a leading provider of advanced computing power.
Overall the company reported a profit of $4.4 billion. Capital expenditures hit $19.6 billion for the quarter, up from $6.9 billion the prior year.
Musk opened the earnings call, which was livestreamed on X, with a simulated video of an upcoming Starship rocket launch set to classical music, which he lauded as a "milestone in the history of civilization and consciousness."
Yet most of the call focused on the AI business, which Musk recently renamed "SpaceX Super Intelligence." Revenue for the unit surged nearly 830% to $7.6 billion. The segment grew from its February acquisition of xAI and includes revenue from renting data center space out to other AI companies, as well as subscriptions to its chatbot Grok and the virtual assistant GrokBot, which came from its $60 billion Cursor acquisition.
Musk made big promises for where the data-center business is going. By the end of next year, he said the company could run around 13 gigawatts of computing power, while adding the number could rise to 23 gigawatts if everything goes right. The company hit 1.7 gigawatts in operation in the third quarter.
Next quarter, the company expects to nearly double its capital expenditures, Chief Financial Officer Bret Johnsen said.
SpaceX reported $1.8 billion in revenue for its space business, up 6% from last year. Its connectivity business, which includes its Starlink internet service, reported $5.2 billion in revenue, up nearly 70% from the year before.