SpaceX outperforms in debut earnings
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Good morning from the Financial Times. Today is Wednesday, August 5th, and this is your FT News Briefing. SpaceX outperforms in its first-ever earnings report, and China wants its wealthiest citizens to pay taxes from decades ago. Plus, Tunisians are outraged over rolling blackouts during an extreme heat wave.
We've seen people angry that their lives are being disrupted. because these kinds of power cuts are unprecedented in Tunisia.
I'm Victoria Craig, and here's the news you need to start your day.
SpaceX shares slid in volatile after-hours trade on Tuesday despite results that beat the street. Elon Musk's rocket company said quarterly revenue jumped 92% from a year ago. It also posted a net loss of about $541 million, but that was better than the more than $2 billion estimated loss.
What were the headline numbers in SpaceX’s first earnings report?
The numbers are a first from SpaceX. It made its stock market debut in June after a record-breaking initial public offering that crowned Elon Musk the world's first trillionaire. Rafe Rosner-Udin has been listening to the earnings call for us out in San Francisco. He joins me now to chat through these results. Hi, Rafe.
Hi, Victoria.
So growth looked to be accelerating across all of SpaceX's business segments. What is disappointing investors with these results?
What has seemingly taken investors either by surprise or maybe underwhelmed them is that despite a massive ramp up in capital expenditure for the company's AI arm, XAI, about 15.8 billion of the 18 or so billion dollars that they've spent in the quarter was spent effectively on data centers. But most of the compute that the company seems to be building is being directed towards other companies, mainly Amthropic and Google, but not SpaceX's own AI venture. And what that means for the company's AI efforts and whether it's struggling and continuing to struggle there is going to, I think, be a persistent theme over the coming quarters.
It also seems, judging from these results, Rafe, that a lot of the company's performance really hinges on Starlink. That's its satellite network. Do you think investors are undervaluing the potential of that for SpaceX?
I mean, Musk certainly thinks so. I think he spent a good portion of the earnings call talking about how it's hard for people to wrap their heads around this business unit's potential. It's obviously driving more than half of the company's revenues. It's the only profitable part of the business. And it's certainly the part of the business that leads in its own market. There are few competitors to Starlink. So we've got smaller competitors like UTELSAT, and then Amazon is attempting to build up a constellation that would be able to offer satellite internet as well. But nobody has as many satellites up in space as SpaceX do.
If we look at SpaceX on the market on the whole, shares of the company have dropped about 20% since their debut. I just wonder, has cooling investor sentiment been a source of concern, or will it be a concern for Elon Musk going forward?
So SpaceX at their IPO raised a record amount, about $86 billion. And the shares have slid dramatically since. A lot of that sentiment is being driven by fear that come Thursday, when a lockup period for employees ends, there's going to be a period of selling that's going to further dent the share price. There's also uncertainty about this business. The AI arm has been completely overhauled. A number of key hires or XI's co-founders have all but left the business. Musk has spoken about how it needs to be reinvigorated, effectively starting from scratch in a race where lots of competitors, whether it's OpenAI or Anthropic or Alphabet, are racing ahead. So the shares are down quite dramatically. And there are lots of problems within SpaceX's business, particularly on the AI side, that are further denting that.
So investors, Rafe, clearly disappointed, but what would make them happier in the coming quarters?
So one of the things that we saw going into big tech posting earnings this quarter was fear that lots of the investment that hyperscalers, so Microsoft, Alphabet and Amazon were making, wasn't turning into significant revenue growth.
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