SpaceX to Report Q3 Earnings Tuesday Amid Tesla Merger Speculation

SpaceX is scheduled to release its third-quarter financial results after the market closes on Tuesday, a report that Tesla shareholders are watching closely due to ongoing speculation regarding a potential merger between the two companies.

What Happened

According to Bloomberg consensus estimates cited by Pepperstone, SpaceX is projected to report revenue of $12.89 billion, adjusted EBITDA of $6.62 billion, and adjusted earnings per share near $0.15. These figures would represent approximately 65% growth from the second quarter and mark the company's first profitable quarter since its initial public offering. Analysts anticipate that the Starlink division will contribute $4.9 billion in revenue, with the service reaching 14.3 million consumer subscribers, while the AI segment is expected to generate roughly $6.4 billion. Despite the projected profitability, capital spending is forecast at $19.6 billion, which would result in free cash flow of approximately negative $11.6 billion.

Why It Matters

The earnings report arrives as SpaceX attempts to stabilize its stock following a volatile post-IPO period. The company priced its record IPO at $135, reached a high of $225.64, and subsequently fell to near $105 in early August. As of Friday's close, the stock sat at $146.03, about 28% below its June peak. While the second-quarter report beat revenue expectations at $7.8 billion, heavy capital expenditures of $18.4 billion negatively impacted investor sentiment. Recent developments, including the successful Starship Flight 14 launch, an $8 billion agreement for 800 MHz spectrum, and a $13 billion annual compute hosting deal, have bolstered management's targets of more than 2 gigawatts of compute capacity by year-end and a $100 billion annualized revenue run rate. Evercore ISI, which raised its price target to $275, noted that the quarter may be evaluated primarily on progress toward these targets rather than reported financials.

Underlying these results is the potential for a merger between SpaceX and Tesla. Barclays analyst Dan Levy predicts an all-stock deal where SpaceX acquires Tesla at a premium, using reference values of $2.1 trillion for SpaceX and $1.5 trillion for Tesla. Levy suggests that an announcement would need to occur by late October or early November to allow for a vote at Tesla’s December 6 annual meeting. In such a scenario, Elon Musk would hold approximately 37% of the combined company and 56% of the votes. Tesla shareholders' shares would convert into SpaceX stock, exposing them to a company with significant AI investments and projected 2026 capital expenditures exceeding $25 billion. A strong Q3 performance and moderated spending could facilitate this exchange, whereas heavy capex and a declining stock price might complicate the deal.

The Bottom Line

SpaceX's Q3 earnings report is a critical test of its financial trajectory and a potential catalyst for a Tesla merger. With revenue expected to hit $12.89 billion and the first post-IPO profit in sight, the results will influence the feasibility and terms of any future combination with Tesla, particularly given the tight timeline for announcements before Tesla's annual meeting.