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SpaceX reported a $4.4 billion third-quarter profit as AI revenue surged nearly tenfold, while special committees at both companies examine a possible merger
Elon Musk has confirmed that SpaceX and Tesla have formed special committees to discuss a possible merger, calling the idea a “good idea” as his space and electric vehicle businesses move closer in their technology ambitions. The development came as SpaceX reported a $4.4 billion third-quarter profit, helped by a nearly tenfold jump in revenue from its artificial intelligence business.
“I think it would be a good idea, but it’s really up to the special committees of both companies,” Musk told investors during SpaceX’s earnings call.
Musk said he could not participate in the committees’ discussions because he was a conflicted party. Any merger would ultimately require shareholder approval, he added.
The confirmation marks the clearest indication yet that a potential merger is being formally considered, after months of speculation about bringing the two companies under one corporate structure. However, Musk cautioned that a deal was not certain.
“Some people out there assume that a SpaceX and Tesla merger is a certainty,” he said. “I think that would be overstating it.”
Speculation about a deal has gained momentum in recent weeks. Barclays suggested last week that an announcement could come before Tesla’s annual shareholder meeting in December, with SpaceX potentially acquiring the electric vehicle maker.
More from BusinessAI changes SpaceX’s business
SpaceX’s latest results show how artificial intelligence is becoming a major source of revenue for the company, which has traditionally been known for rocket launches and its Starlink satellite internet service.
Revenue rose 161 per cent year-on-year to $14.58 billion in the three months ended September 30. The company reported net income of $4.4 billion, compared with a loss of $1.1 billion a year earlier. The profit also exceeded analysts’ expectations of $1.57 billion.
Revenue from AI surged nearly tenfold to $7.56 billion during the quarter. Much of the income came from renting data-centre computing capacity to AI developers, including Anthropic, Google and Reflection AI, rather than from its own AI models.
The growth reflects SpaceX’s expanding role in the infrastructure needed to develop and run AI systems. Its operations include the Grok chatbot, the social media platform X and a growing network of data centres.
Musk described the company as being at an “inflection moment” across launch services, connectivity and AI. He also said SpaceX was tracking an annual revenue run rate of between $500 billion and $1 trillion by the end of 2027.
SpaceX Chief Financial Officer Bret Johnsen reiterated that the company expected annual recurring revenue of about $100 billion by the end of 2026.
However, the expansion requires heavy investment. SpaceX spent $19.6 billion on capital expenditure in the third quarter, including $16.4 billion on AI. The company expects capital expenditure of $35 billion to $40 billion in the fourth quarter.
What connects SpaceX and Tesla?
A merger could bring together businesses with interests in AI, robotics, computing and advanced technology. SpaceX operates rocket launch services and Starlink, while Tesla is focused on electric vehicles, energy storage, autonomous driving and robotics.
Both companies are also investing in AI, which could create opportunities to share technology and infrastructure. Musk has previously pointed to the growing overlap between his businesses as a reason to consider closer cooperation.
A combined company could potentially connect Tesla’s vehicle and robotics operations with SpaceX’s satellite network, launch capabilities and computing infrastructure. The actual benefits would depend on the structure of any transaction and how the businesses were integrated.
The two companies nevertheless have different operations and financial priorities. Tesla’s business remains closely tied to vehicle demand and its investments in autonomous driving, while SpaceX must fund satellite expansion, rocket development and its fast-growing AI operations.
The formation of special committees allows the companies to examine a possible deal, but it does not mean they have agreed on its terms. Shareholders would still need to approve a merger.
Starlink expands as SpaceX invests in Starship
Starlink remains a key part of SpaceX’s business, providing satellite internet services to consumers, businesses, airlines, ships and government customers.
The service reached 13.6 million subscribers in the third quarter, above analysts’ expectations of 12.19 million. However, average monthly revenue per subscriber fell to $69 from $99 in 2023 as the company expanded into new markets with cheaper plans.
SpaceX is also developing Starship, its next-generation reusable rocket system. The vehicle is expected to help deploy more advanced Starlink satellites and could eventually support the company’s plans for computing infrastructure in space.
Starship has yet to enter commercial service, and its development remains a significant source of cost and uncertainty. SpaceX continues to rely on its Falcon rockets for commercial launches, government missions and deployments for its own satellite network.
The possible merger with Tesla comes at a time when SpaceX is expanding beyond its traditional space business and investing heavily in AI. Whether the two companies eventually combine will depend on the outcome of the committees’ discussions and shareholder approval.
