SpaceX Beats, but the Test Is Whether It Can Build on the Gains
Last quarter’s strong AI beats faded. Will it be different this time? Here’s my plan for SPCX.
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As we enter the meat of earnings season, the major theme remains rotational action filling the gap between the market’s two tiers. Tuesday produced some of the best moves we have seen in a while. Breadth improved, and many lagging names moved strongly. Big-cap tech didn’t collapse, but it was choppy, and the money that came out of it found plenty of other places to go.
Early Wednesday, the Roundhill Magnificent Seven ETF (MAGS) is flat as investors look ahead to after-hours reports from Meta Platforms (META) and Tesla (TSLA). The chips bounced overnight but have already been fading. The big mover is SpaceX (SPCX), which is trading up about 8% after beating on both the top and bottom lines, but like the chips, it is off its overnight highs.
The SpaceX Numbers
The SpaceX quarter was a solid headline beat. Revenue jumped 161% to $14.6 billion, well above the consensus of about $12.9 billion. Adjusted earnings came in at $0.35 a share, more than double expectations of $0.15.
The AI computing business, which SpaceX calls Super Intelligence, brought in $7.6 billion, more than half of total revenue, compared with estimates of $6.3 billion. Starlink and the rest of the connectivity business added $5.2 billion, and it still generates most of the operating profit.
The guidance was even more striking. SpaceX expects revenue of $33 billion to $37 billion in the first quarter of 2027, compared with Wall Street’s estimate of around $22 billion. We are already seeing price target increases early on Wednesday, with Barclays going to $300 from $254 and Citi setting a $240 target and putting the stock on its “upside 90-day catalyst watch.”
Spending Is the Story
SpaceX spent $19.6 billion in the third quarter, more than twice its adjusted EBITDA of $8.8 billion, with $16.4 billion of that going into AI computing capacity. That was roughly in line with expectations, but the guidance for the fourth quarter is $35 billion to $40 billion. Spending is about to roughly double again.
That spending is what drove the results. The data center capacity SpaceX has been building is what produced the jump in AI revenue, and it is what supports that huge first-quarter guidance. But it isn’t free. Operating cash flow was about $9.6 billion in the quarter, which covered only about half of the capital spending. Over the first nine months of the year, SpaceX spent about $35 billion more on capital projects than it generated from operations. That gap is why the company needs outside money, and why a reported $40 billion capital raise is in the works.
It is also worth noting that net income of $4.4 billion got a lift of about $1.6 billion from items below the operating line, including other income and a tax benefit. The operating results were strong, but not quite as strong as the bottom line suggests.
So the debate hasn’t changed. The growth is solid, and SpaceX is turning its spending into revenue faster than most. The question is how much investors are willing to keep funding to get there.
Can It Hold?
The issue now is whether SpaceX shares can hold on to these gains and build further momentum, or whether the pop becomes an opportunity to reduce exposure. Last quarter, strong AI reports produced an initial positive reaction but no sustained momentum. There wasn’t much chasing after the initial flurry, and the holders used the strength to sell.
If SpaceX holds its gains and Meta and Tesla follow with good reactions, the AI trade may stabilize. If the strength fades, it tells us that the holders are still looking for exits, and the rotation into the laggards will continue. Either way, the reaction to these reports will tell us whether the rotation keeps going.
Game Plan
I’m considering a partial sale of SpaceX into this strength, with an eye toward a remount once it settles down. I like the company long term, but I don’t expect the AI names to see the kind of sustained momentum they had before, and a big gap up on earnings is a good time to lock in some gains. There is a lot of excitement about SpaceX early this morning, but we will see how long it lasts.
My overall plan is to trade tight and look for more signs of strength in the lagging names. We are undergoing a shift in this market, and I don’t expect the Magnificent Seven and AI to provide the leadership they did. That doesn’t mean those stocks collapse, but they aren’t going to trend higher the way they did in the past. Charts are improving in biotechnology and other lagging groups, and that is going to be my primary focus.
At the time of publication, Rev Shark was long SPCX.
