SpaceX’s AI spending unnerves Wall Street despite promises of quick payoff

After SpaceX spent way more on its AI buildout than analysts expected, executives tried to convince investors on Tuesday that it’s all worthwhile, claiming that the firmis making its fundsback within a year.

The message didn’t resonate, as SpaceX stockssank following the company’s first earnings report since its IPO in June. While revenue in the second quarter sailed past estimates, jumping 92% from a year prior, capital expenditures soared over sixfold to $18.4 billion, more than double total sales for the quarter.

Well over 80% of SpaceX’s capex went towards artificial intelligence, where the firmis way behind OpenAI, Anthropic and Google when it comes to models and services, and where it’s currentlytrying to compete against cloud giants Microsoft, Amazon and Google by selling compute capacity.

The capex figure exceeded the $13.22 billion average analyst analyst estimate, as perFactSet. The stock’s 7.5% after-hours dropped mostly wiped out its gains from earlier in the day and left the stocksmore than 20% below the first trade on June 12.

Bret Johnsen, SpaceX’s CFO, suggested on the earnings call that investors should start thinking differently about capex because of how quickly it’s converting into revenue.

“We have been very efficient, to date and I think we’ll continue to be,” Johnsen said. “On the AI compute side, we’re able to deploy capital in such a way that we’re getting less than a one-year payback.”

Days before its record IPO, SpaceX inked a deal with Google that will bring in up to $920 million a month by providing AI compute capacity to the search giant. Prior to that, Anthropic announced a deal that would involve paying up to $1.25 billion a month for three years for compute capacity at SpaceX’s Colossus data center in Memphis, Tennessee. And SpaceX has a separate agreement to provide computing power to Reflection AI for up to $150 million a month.

Johnsen statedthat in the first few weeks of the current quarter, SpaceX contracted $6.7 billion of cloud services revenue “over a six-month period that begins ramping starting in October.” Add it up, and the firmis on pace to reach $100 billion in annualized recurring revenue by the end of the year, Johnsen said, noting that his numbers assume closure of the $60 billion Cursor acquisition.

In 2025, SpaceX’s total revenue came in at below $19 billion.

SpaceX CEO Elon Musk statedinvestors can take the 2026 target to the bank.

“To be clear, the $100 billion ARR in December is not a question mark,” Musk said. “That’s what we would achieve if we basically did nothing.”

SpaceX addressed Wall Street for the first time during a period of heightened scrutiny surrounding AI spending as tech outlays reach into the stratosphere. Alphabet and Amazon could each spend over $200 billion this year, with Microsoft and Meta not too far behind. Companies are watching their cash piles dwindle, betting that all these upfront investments on data centers and costly AI systems from the likes of Nvidia will be profitable in the long run.

The particular challenge for SpaceX, which entered the AI industryin February through its merger with Musk’s xAI, is that reselling AI capacity for short-term revenue is a strategy that’s detached from the company’s broader ambitions. The firm statedin its IPO prospectus that its “dual monetization strategy provides multiple pathways to generate returns on invested capital.”

Musk wants to be an AI pioneer through some combination of his company’s Grok model and eventually by building data centers in space. The deals with Anthropic, Google and Reflection indicate that SpaceXAI, as the AI enterpriseis currentlyknown, built way more capacity at its mammoth data centers in Memphis than it’s able to put to use.

Musk statedon the call that the firmhas a “series of projects” that cumulatively come to 20 gigawatts of capacity, including power and cooling, by the end of next year.

“Some of them won’t pan out exactly on time, but I would expect that we’d still probably have, at the power plant level, something close to 15GW,” Musk said.

There are also potential legal headwinds. SpaceXAI has been sued for using natural gas-burning turbines to power its facilities in Memphis without first installing pollution controls and obtaining federal permits. In its quarterly filing, SpaceX statedit’s recorded an accrual of $354 million for “litigation losses that are probable.”

To this point, SpaceX’s AI enterprisehas been bleeding cash.

In the second quarter, the unit generated $2.56 billion in revenue and had a $1.26 billion operating loss. That followed a $2.47 billion loss in the first quarter on $818 million in revenue.

The firmis trying to change the narrative with the new cloud agreements that Johnsen statedhelped deliver “significant margin expansion” in the quarter.

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