SpaceX and Tesla earnings test AI spending case as merger talk builds

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SpaceX and Tesla earnings

Highlights

SpaceX expected to report Q3 revenue of about $12.74 billion and 14 cents EPS, with connectivity revenue, including Starlink, up 66% to $4.3 billion.
Tesla is forecast to post Q3 adjusted EPS of 43 cents on $27.88 billion revenue, with vehicle deliveries at 486,532 and anticipated Q3 negative free cash flow of $4.92 billion.
Barclays sees a potential all-stock merger announcement of SpaceX and Tesla before Tesla's December 3 annual meeting, estimating Musk would own 37% equity and 56% voting power.

Earnings spotlight falls on funding capacity

As reported by Reuters, the upcoming results are expected to sharpen investor focus on whether the two companies can sustain expanding AI-related spending while preserving operating momentum. Analysts and shareholders are watching Starlink revenue growth at SpaceX and auto margin improvement at Tesla as the clearest indicators of that capacity.

Shawn Campbell, an adviser at Camelthorn Investments who owns shares in both companies, said investors are likely to focus more on Starlink revenue growth than launch counts at SpaceX, while looking for better vehicle margins at Tesla. Barclays said last week that a deal could be announced before Tesla's annual meeting, with SpaceX seen as the more likely buyer, although neither company nor Musk has officially indicated support for a transaction.

Tesla said on Monday that its annual meeting will be held on December 3. In an all-stock deal, Barclays estimates Musk would hold about 37% of the equity and 56% of the voting power.

Campbell said a SpaceX acquisition of Tesla would be cleaner because it could make it easier to handle Tesla's China business separately as an asset. Bill Birmingham, head of research at REX Financial, said Tesla's unveiling last week of a new Roadster planned for 2028 production, featuring rocket technology demonstrated at a SpaceX test site in Texas, appeared to reinforce the engineering logic that some investors see behind merger speculation.

AI investment and long-term growth drive valuation

SpaceX reports on Tuesday and Tesla on Wednesday after markets close, with SpaceX delivering only its second set of results as a public company. The company is expected to post third-quarter revenue of about $12.74 billion and earnings of 14 cents a share, according to LSEG data, compared with second-quarter revenue of $7.8 billion, a net loss of $541 million and AI capital spending of $15.8 billion.

Evercore ISI expects SpaceX to leave 2026 with an annualized revenue run-rate of about $104 billion, driven mainly by its AI segment, and sees capital spending reaching about $151 billion in 2027. Connectivity revenue, which includes Starlink, rose 66% to $4.3 billion in the second quarter, and SpaceX also agreed on October 8 to buy 800 MHz spectrum from Grain Management for about $8 billion, a deal that still requires Federal Communications Commission approval and supports its Starlink Mobile expansion.

Tesla is on track to grow deliveries this year for the first time since 2023, but investor attention remains centered on profitability and robotaxi plans. Analysts expect adjusted earnings of about 43 cents a share on revenue of roughly $27.88 billion, versus 50 cents a year earlier, while the company delivered 486,532 vehicles in the third quarter, ahead of analyst estimates.

Second-quarter profit fell well short of expectations and free cash flow turned negative by $1.1 billion, the first move into the red in more than two years. Tesla has said capital spending will exceed $25 billion this year, its shares are down about 17% in 2026, and analysts expect negative free cash flow of $4.92 billion for the third quarter as Wall Street continues to value the company largely on robotaxis and the Optimus humanoid robot rather than its core car business.

Our earlier coverage on the surge in U.S. AI data centers highlighted how the buildout is being strained by expensive financing, construction delays, and power-grid constraints. It noted that only a limited share of planned projects looks credible, while cost overruns and tighter capital markets are testing investor confidence in whether developers can turn massive AI spending into sustainable returns.

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