The Zhitong Finance App learned that after SpaceX (SPCX.US) announced its third-quarter earnings report, UBS said in a research report released on Wednesday that thanks to the strong performance of the artificial intelligence (AI) computing power leasing business, SpaceX's performance greatly exceeded this forecast, and the growth rate accelerated significantly.
SpaceX founder and CEO Elon Musk also talked about SpaceX's merger with Tesla. He said that the company has set up a special committee to evaluate the deal, but he himself has avoided related discussions, so the information he can disclose is limited. He said that merging the two companies is highly reasonable, but this is by no means a foregone conclusion.
Management also provided some new guidance, including capital expenditure estimates of $35 billion to $40 billion for the fourth quarter (previously UBS expected $19 billion), up from $19.6 billion in the third quarter as construction progress is accelerating. UBS estimates that the company will need to invest about 350 billion US dollars to achieve the 13 gigawatt computing power deployment target. This scale is roughly comparable to other major hyperscale cloud service providers (in comparison, Google is about 380 billion US dollars, Microsoft about 230 billion US dollars, etc.).
UBS believes SpaceX continues to deliver on the market's high expectations, and this trend will continue — new computing power deals are launched in the fourth quarter, Starship is moving towards the goal of capturing spaceships and boosters, and Grok's performance and products continue to be upgraded. The bank believes that the company's portfolio of these assets is unique and will continue to create value in the long run as management achieves these goals one by one. UBS gave SpaceX a “buy” rating, and the target price for 12 months was $230.
1. Super Intelligence (SI) Business: Accelerate the deployment of computing power
The SI business revenue was US$7.6 billion (same as UBS's forecast and higher than the market consensus estimate of US$6.5 billion), up 195% month-on-month and 830% year-on-year. Among them, the AI cloud business contribution continues to increase (the Anthropic transaction has reached a full operating rate, and Google has begun to make initial contributions), and the acquisition of Cursor has also been completed. This drove EBITDA to achieve high profit conversion, reaching $5 billion (UBS expected $4.5 billion, market consensus expected $4 billion), with a profit margin of 66%, up from $1.1 billion and 45% in the previous quarter.
The computing power capacity increased by 300 megawatts to 1.7 gigawatts (UBS expects 1.8 gigawatts). Currently, the computing power delivery and operation speed has reached about 200,000 GB300 pieces per month (which means adding about 1.2 gigawatts every quarter). Management expects the company to maintain this delivery pace with the shipment of Rubin chips in 2027 (which means adding about 1.9 gigawatts every quarter). Currently, cloud computing power pricing is slightly higher than the $30 to $50 per watt range outlined in the previous quarter, and the company will continue to use short-term deals to benefit from rising GPU prices. By the second quarter of 2027, SpaceX plans to deploy a cluster of 440,000 Rubin chips (approximately 1.4 gigawatts) to achieve optimal training results and drive Grok to make further progress.
In the earnings conference call, Musk said that he is “constantly being urged by every hyperscaler (hyperscaler)” to provide more computing power rental services, and that demand is so strong that the company's current computing power capacity will quickly be sold out even if it is sold several times. He expects spot rental prices to continue to rise, potentially shortening the payback period to about 6 months by next year.
Based on this, the company has now raised its computing power capacity target to 13 gigawatts by the end of 2027, which is an increase of about 10 gigawatts compared to the 2.5-3.0 gigawatts previously estimated at the end of 2027. Musk said that based on current visibility of power generation capacity, the computing power capacity is even expected to reach 20 gigawatts in 2027. Based on this infrastructure scale, and the roughly 50:50 ratio of owned and leased computing power capacity, this will support the company to achieve annual recurring revenue (ARR) of 100 billion US dollars by the end of this year, which may reach 500 billion US dollars to 1 trillion US dollars by the end of 2027.
Management also mentioned the modular inference computing power deployment scheme to speed up the deployment schedule by integrating power and cooling systems within the plant.
2. Connectivity business: Expected to accelerate in the fourth quarter and 2027
Connectivity business revenue reached US$5.2 billion (UBS and market consensus expectations were US$4.9 billion), an increase of 70% year over year; EBITDA was US$3.5 billion (UBS expected US$2.8 billion, market consensus forecast was US$2.9 billion), an increase of 82% year over year.
Consumer broadband revenue increased 57% year over year (UBS expected 48%), and corporate and government business (including Starlink Mobile) increased 91% year over year (UBS expected 79%), compared to 44% and 108%, respectively, in the previous quarter. The net number of new Starlink (Starlink) users was 1.6 million (UBS expected 2.3 million; 1.7 million in the second quarter), and the total number of consumer users reached 13.6 million. Meanwhile, average revenue per user (ARPU) fell 17% year over year to $69 (down 22% year over year in the previous quarter).
Management expects user growth to accelerate in the fourth quarter (UBS expects 2.4 million new users) as the company is increasing terminal inventory and delivering equipment kits to retail channels before the holiday season arrives.
Furthermore, following the recent completion of the 800 MHz spectrum acquisition, management reiterated that it is confident that it can seize share in the US mobile communications market and plans to launch the first V2 mobile satellite launch in 2027. Although management did not specify how or when the company would deploy the newly acquired spectrum, it was confirmed that the 800 MHz band would be deployed on the Acer base station. After the conference call, Musk posted an article on the X platform, once again emphasizing the need to better explain the company's mobile business strategy and saying that telecom industry veterans are unaware of the fundamental changes SpaceX has brought to the industry.
3. Space business: Starships are in orbit, and investment remains high
Space business revenue was US$1.77 billion (UBS forecast was US$1.26 billion, market consensus forecast was US$1.41 billion), up 6% year over year (up 29% year on year in the previous quarter), and is currently in the transition phase from Falcon 9 (Falcon 9) to Starship.
EBITDA was US$357 million (UBS expected US$144 million, market consensus expected loss of US$46 million), down from US$672 million in the same period last year, due to increased Starship R&D expenditure.
The 14th Starship (Starship) flight was SpaceX's first Starship mission to enter orbit and generate revenue. It was a key technical milestone in the project's evolution from the R&D stage to the commercial operation stage.
The 14th flight deployed 26 Starlink V3 satellites into the broadband satellite constellation. Their payload was about half of the Starship's potential V3 payload capacity, but the downlink capacity was still about 10 times that of the Falcon 9 mission.
Management expects Starship to be launched once a week in the first half of 2027 and twice a week in the second half of 2027, which means that up to 72 launches may be carried out in 2027 (UBS anticipates 30, market consensus anticipates 40).
The company is still proceeding with the plan to try to recycle the two stages of the Starship this year (the 15th flight target is next month), and plans to launch the second stage again in early 2027, and also conduct an in-orbit fueling demonstration next year.
The total number of Falcon 9 launches in the third quarter was 35, down from 38 in the second quarter of 2026 and 44 in the same period last year, including 12 customer launches and 23 internal launches. The entry mass was 476 tons, down from 525 tons in the same period last year.
Client missions include NASA's Nancy Grace Roman Space Telescope (Nancy Grace Roman Space Telescope) launch missions, 6 of which served national security customers. This quarter, the company added 3 new manned Dragon spacecraft (Dragon) missions, which will continue until 2028; in addition, 18 new national security launch missions, 3 Starfall missions, and a Starship lunar payload delivery contract have also been added.