SpaceX Spent More Than Twice Its Revenue on AI Last Quarter

SpaceX reported second quarter revenue of $7.81 billion on Tuesday, up 92% year over year and ahead of the $6.93 billion analysts had expected, according to CNBC. Net loss narrowed to $541 million from roughly $1 billion a year earlier, and adjusted EBITDA nearly tripled to $3.54 billion. The stock fell about 8% in extended trading regardless, CNBC reported.

Capital expenditures came in at $18.37 billion for the quarter, more than six times the year ago figure and up from $10.1 billion in Q1, per the company's second quarter results release. Of that, $15.83 billion went to AI infrastructure. Set against $7.81 billion of revenue, SpaceX spent roughly $2.35 on capital projects for every dollar it brought in, with about $2 of that going to AI.

The ratio is an outlier. Using each company's reported quarterly figures, Amazon's capex ran at about 27% of revenue in the same period, Alphabet's at 37%, Microsoft's at 46% and Meta's at 51%.

The rule the market spent two weeks writing

SpaceX reported into a market that had just spent a fortnight grading five other companies on the same question, with mixed results.

Alphabet beat on revenue on July 22 and lost roughly 7% of its value the following day after CFO Anat Ashkenazi raised full year capex guidance to a range of $195 billion to $205 billion, up from $180 billion to $190 billion, per CNBC. Quarterly capex reached $44.9 billion and free cash flow fell to negative $5.9 billion.

Meta had a harder time of it. Revenue grew 28% to $60.8 billion on July 29, but $31.1 billion of quarterly capex consumed almost every dollar of the company's $31.9 billion in operating cash flow, according to Fortune. Free cash flow fell to $784 million from $8.5 billion a year earlier. Shares dropped close to 10%.

Microsoft and Amazon both spent more in absolute terms than Meta did, and both were rewarded for it. Microsoft rose roughly 8% after reporting that Azure growth accelerated to 43%, ahead of the 40% analysts polled by CNBC and StreetAccount had modelled, CNBC reported. Amazon shares climbed more than 10% in extended trading after AWS revenue grew 37%, its fastest rate since 2021, against expectations of 31%, per CNBC. Total revenue reached $200.61 billion, and CEO Andy Jassy raised the company's full year capital spending forecast to $220 billion from $200 billion.

What separated them was less the size of the spending than the state of the revenue attached to it. Microsoft could point to a consumption line already growing at 43%. Meta was asking investors to wait.

Why SpaceX should have cleared that bar

Judged by the standard applied to Microsoft and Amazon, SpaceX arguably had the strongest case in the group. Its AI segment generated $2.6 billion in revenue, up 213% sequentially and 247% year over year, faster than either Azure or AWS by a wide margin. The segment's operating loss narrowed 49% from Q1 to $1.257 billion and adjusted EBITDA turned positive at $1.146 billion, according to the earnings call transcript. Nameplate compute reached 1.4 gigawatts, up from 1 gigawatt in Q1 and 400 megawatts before that, and new hosting agreements added $1.6 billion of incremental AI infrastructure revenue during the quarter.

The explanation for the selloff sits in the segment breakdown rather than the headline numbers. Connectivity, which is largely Starlink, produced $1.66 billion of operating profit on $4.3 billion of revenue, adding 1.7 million net subscribers to finish the quarter above 12 million. Space and AI together lost about $1.8 billion, which accounts for nearly all of the $143 million consolidated operating loss.

In other words, Starlink is currently financing both Starship and the AI buildout, and it is not yet large enough to do so comfortably.

The balance sheet is doing the work

This is the structural difference between SpaceX and the rest of the field. Microsoft, Alphabet and Meta fund their infrastructure out of operating cash flow, however thin that has become. SpaceX is funding its buildout from a one off windfall. Cash and equivalents stood at $93.5 billion at the end of the quarter, up from $24.7 billion three months earlier, CNBC reported, almost entirely the proceeds of the June IPO.

Investors marked Meta down for spending against a forecast. SpaceX is spending against a bank balance. That is a different risk, not necessarily a smaller one, though it does come with a defined limit.

The sequential figures make the point. AI revenue grew $1.74 billion quarter on quarter while AI capex grew $8.11 billion, which works out at roughly $4.65 of new capital per dollar of new AI revenue. Capital spending creates assets that earn over several years, so the ratio is not a verdict on the business. Management did indicate, however, that the next two quarters could look similar.

An increasingly circular market

Two details from the past three weeks sit awkwardly together. Alphabet booked a $99 billion gain on equity securities in the second quarter, which added $77.1 billion to net income and $6.26 to diluted earnings per share, Fortune reported after examining the filing footnote. Most of it came from Alphabet's stakes in Anthropic and SpaceX, though the company has not broken out how much each contributed. The record quarter of the most heavily scrutinized AI spender was carried in large part by the listing of the newest one.

Separately, Nvidia's equity stake from xAI's $20 billion funding round converted into SpaceX stock when the companies combined, according to CNBC. On Tuesday, SpaceX announced a partnership with Nvidia to design its Starmind AI-1 payload, using Rubin GPUs and Vera CPUs to lift peak satellite computing capacity to 250 kW, per Yahoo Finance. Musk told analysts on the call that Nvidia will be the exclusive supplier for SpaceX's AI chip requirements. An existing shareholder is now the sole vendor, in a business capitalized by public markets three months ago.

What to watch next

The nearest test comes on Thursday, when more than 900 million shares held by employees and other insiders become eligible for sale as the IPO lockup expires, Reuters reports. Some of this week's price action reflects positioning ahead of that date rather than any judgment on capital allocation, and the two should be kept apart.

Further out, the bet is orbital. SpaceX has floated an ambition to launch up to one million orbital data centers, a plan that has already drawn objections from scientists over debris and environmental risk, CNBC reported. The $15.8 billion is buying compute in low Earth orbit, not another campus in Virginia.

For enterprise buyers the question is more immediate. SpaceX is now selling hosted compute at scale, and it is the only vendor in that market whose cost base is underwritten by a satellite broadband business. The next two quarters should indicate whether that makes it a cheaper supplier or a more precarious one.

Capex to revenue ratios are State of AI calculations based on quarterly capital expenditure and revenue as reported by each company.