By William Gavin

SpaceX has been renting out access to computing power, which is a big source of revenue growth but also one that comes at a high cost

SpaceX didn't give investors much notice of its plans to announce earnings on Tuesday afternoon.

SpaceX is set to report third-quarter earnings on Tuesday, with artificial intelligence likely to be the star of the show.

From a financial standpoint, SpaceX (SPCX) is expected to report a return to profitability, with earnings per share of 13 cents compared to a loss per share of nine cents in the June quarter, according to FactSet data. Sales are expected to have been $12.8 billion, up 64% versus the same period a year earlier.

That increase is at least partially thanks to the company's work on AI, namely selling access to the resources needed to run it. Deutsche Bank analyst Edison Yu expects AI revenue to have grown nearly three times from the June quarter to about $6 billion.

Yu estimates that the handful of customers SpaceX has signed on to buy its AI computing power are worth $54.5 billion of run-rate revenue, which companies use to estimate full-year revenue based on performance over a short period of time. That accounts for over half of SpaceX's end-of-year $100 billion target.

However, that revenue comes at a steep cost. SpaceX needs to spend tens of billions of dollars to expand its data centers and provide enough resources for both its internal work and its customers. Putting data centers in space will also be very expensive.

Yu said in a client note on Monday that he thinks SpaceX spent $19 billion of capital last quarter, primarily focused on AI computing matters. Wall Street expects SpaceX to spend $67 billion altogether by the end of the year, according to FactSet.

Financing the buildout envisioned by CEO Elon Musk will cost much more than that, with one analyst estimating an up to $336 billion bill in 2027. SpaceX reportedly aims to borrow $40 billion to pay for the Nvidia (NVDA) chips it uses in its data centers. Just a few months ago, it raised $25 billion of debt.

"Need for additional financing remains a key overhang for sentiment, especially given the recent neocloud debt saga," Morgan Stanley's Adam Jonas wrote in a Monday note to clients. The bullish analyst expects SpaceX to issue another $80 billion in debt next year.

"This is the biggest risk to our model, and we do not want to downplay it - although a hypothetical world where SpaceX cannot raise financing likely has much broader implications for the economy and the rest of an investor's portfolio," Jonas added.

SpaceX stock gained 1.3% on Monday. Shares were trading at nearly $148 apiece, about 7% above the company's initial public offering price.

SpaceX investors will likely also be looking for more information on its efforts to rival the likes of AT&T (T) and T-Mobile (TMUS) with its Starlink satellite-internet service. Earlier this month, it said it would buy some low-band spectrum, positioning it closer to become a mobile carrier.

There's also interest in when Starship will fly again. The rocket is key to SpaceX's ability to develop each of its businesses, experts say. SpaceX last launched the mega-rocket in September, briefly sending it to orbit for the first time and deploying 26 of SpaceX's new satellites.

"We believe that SPCX's unrivaled launch capabilities represent the foundational competitive advantage that enables all other parts of its business," bullish Citi analysts led by John Godyn said in a recent note to clients.

SpaceX is hosting its quarterly earnings report "surprisingly early," according to Yu. It also gave just two business days worth of notice, and Jonas said he doesn't yet have a "good answer." But SpaceX's earnings now fall just one day before Tesla (TSLA) provides its own routine update to investors.

For months, Wall Street has been discussing the possibility of a merger between the two companies, which several analysts expect to be announced by the end of 2027. Musk is a major shareholder and the CEO of both SpaceX and Tesla, which have an extensive working relationship.

"We see little standing in the way of the consummation of a merger to create 'Elon Inc.,' which we think has long been part of Musk's master plan," Garrett Nelson, a CFRA analyst covering Tesla, wrote in a recent client note following the company's Roadster unveiling.

-William Gavin

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