SpaceX (SPCX.US) reported third-quarter 2026 results that significantly exceeded Wall Street expectations, with the rapid expansion of its artificial intelligence (AI) computing business serving as the primary growth driver.
As the company dramatically raised its future computing capacity buildout targets, JPMorgan, Morgan Stanley, and UBS successively published research reports on October 21, expressing optimism about SpaceX's long-term development prospects in AI infrastructure, Starlink satellite communications, and Starship operations. Among them, JPMorgan sharply raised its price target from $240 to $500, Morgan Stanley maintained its $300 target, and UBS increased its target from $210 to $230.
All three institutions assigned positive ratings to SpaceX. JPMorgan and Morgan Stanley maintained "Overweight" ratings, while UBS kept its "Buy" rating. Based on SpaceX's closing price of $147.79 on October 20, the price targets from the three institutions imply potential upside of approximately 238%, 103%, and 56%, respectively.
SpaceX generated revenue of $14.575 billion in the third quarter, representing year-over-year growth of approximately 161% and quarter-over-quarter growth of approximately 87%, surpassing market expectations of roughly $12.8 billion. Adjusted EBITDA reached $8.809 billion, also significantly above market consensus.
Morgan Stanley noted that the company's revenue and adjusted EBITDA exceeded consensus estimates by approximately 14% and 29%, respectively, with all three major business segments delivering revenue above expectations. Among them, the AI computing business was particularly outstanding. SpaceX's Super Intelligence business generated $7.6 billion in third-quarter revenue, a substantial increase from $2.6 billion in the previous quarter and above market expectations of approximately $6.4 billion to $6.5 billion.
UBS pointed out that this business achieved adjusted EBITDA of $5 billion, with margins rising to 66%, up from 45% in the prior quarter. This growth was primarily driven by the rapid expansion of AI cloud computing leasing, including Anthropic-related partnership projects entering a full revenue contribution phase, Google Cloud beginning to contribute revenue, and additional revenue from the completed acquisition of AI coding company Cursor. Morgan Stanley noted that Cursor contributed approximately $608 million in revenue during its first partial quarter of consolidation.
More importantly, SpaceX management revealed computing expansion plans on the earnings call that far exceeded prior market expectations. The company had approximately 1.7 gigawatts (GW) of computing capacity at the end of the third quarter, expected to increase to approximately 2.2 GW by the end of October, and plans to reach 2.5 GW to 3 GW by the end of 2026. CEO Elon Musk stated he is "highly confident" about adding approximately 10 GW of computing capacity in 2027, implying the company's total computing scale could reach approximately 13 GW by the end of next year. Meanwhile, SpaceX also plans to build approximately 20 GW of power and cooling infrastructure by the end of 2027 to reserve space for further expansion.
Musk stated that the main constraint on computing expansion is no longer AI chips themselves, but rather the pace of construction for power supply, cooling systems, and related infrastructure. On the hardware deployment front, SpaceX is currently deploying approximately 200,000 Nvidia GB300 chips per month and plans to shift toward computing buildout based primarily on the next-generation Vera Rubin platform in 2027. The company also plans to deploy approximately 440,000 Vera Rubin GPUs by the end of the second quarter of 2027, building a large-scale AI computing cluster for Grok model training.
JPMorgan believes the commercial value of the Vera Rubin platform could be significantly higher than that of the previous generation. As deployment of the new-generation chips accelerates, SpaceX will not only be able to expand its rentable computing scale but also improve profitability through higher revenue per unit of computing. According to management disclosures, newly signed computing leasing contracts are now priced slightly above the previous upper limit of $30 to $50 per watt, with payback periods for newly deployed projects at less than one year. UBS noted that Musk expects some project payback periods could shorten to approximately six months next year as computing leasing prices continue to rise.
Musk also stated that demand from large cloud computing service providers for SpaceX's computing resources is extremely strong, and the company's existing and planned computing resources could be fully leased by customers even if expanded several times over. Against this backdrop, SpaceX management suggested that annualized recurring revenue (ARR) could reach $500 billion to $1 trillion by the end of 2027. However, Morgan Stanley specifically noted that this figure represents a long-term business vision proposed by Musk on the earnings call, rather than financial guidance published in the company's formal earnings announcement, and its realization is highly dependent on computing buildout progress, pricing power, and AI product commercialization performance.
However, rapid expansion also means capital expenditures will increase dramatically. SpaceX expects fourth-quarter 2026 capital expenditures to reach $35 billion to $40 billion, far above the approximately $19.6 billion level in the third quarter. JPMorgan estimates SpaceX's 2027 capital expenditures could reach approximately $300 billion; Morgan Stanley raised its 2027 capital expenditure forecast from $161 billion to approximately $278 billion. UBS's forecast is even more aggressive, projecting 2027 capital expenditures could reach approximately $361.9 billion. All three institutions believe that enormous capital requirements will become an important test for SpaceX's future growth.
However, SpaceX management stated that the company has advantages in data center construction costs, with capital investment per 1 GW of computing capacity potentially only around $35 billion, below the approximately $50 billion to $60 billion level of other large computing suppliers. JPMorgan noted that SpaceX is not currently considering raising funds through new share issuance, but instead plans to use debt financing channels and growing operating cash flow to support expansion. However, the bank also acknowledged that realizing such an enormous computing buildout plan requires the simultaneous smooth progress of power supply, infrastructure construction, financing, and customer demand, among other factors.
Beyond the AI business, SpaceX's Starlink satellite communications business also maintained growth. In the third quarter, SpaceX's communications business generated $5.2 billion in revenue, up 70% year-over-year, with adjusted EBITDA reaching $3.5 billion, up 82% year-over-year. Starlink added approximately 1.6 million consumer users in the quarter, bringing total users to 13.6 million. However, this new user scale fell short of market expectations, primarily affected by factors such as user terminal product transitions and inventory constraints. Meanwhile, consumer average revenue per user (ARPU) grew 5% quarter-over-quarter to $69, reflecting the company's greater emphasis on mature markets with stronger paying capacity. Morgan Stanley noted that although user growth fell short of expectations, higher ARPU drove consumer business revenue above expectations.
Looking ahead, SpaceX plans to use next-generation Starlink V3 satellites to increase network capacity and accelerate expansion into the mobile communications market. The company expects to begin deploying Mobile V2 satellites in 2027 and aims to launch related services using newly acquired spectrum in early 2028. In the space launch business, SpaceX generated approximately $1.77 billion in third-quarter revenue, up 6% year-over-year. The company's 14th Starship test flight successfully entered orbit and deployed 26 Starlink V3 satellites, marking further progress toward commercial operations for the Starship program. The market's next key focus will be the 15th Starship test flight expected in November. At that time, SpaceX plans to simultaneously attempt recovery of both the Super Heavy booster and the Starship upper stage spacecraft. If successful, it would represent an important milestone toward achieving full Starship reusability and could further reduce satellite deployment and space transportation costs.
Additionally, Musk also responded on the earnings call to the possibility of a potential merger between SpaceX and Tesla (TSLA.US). He stated that the two companies have established a special committee to evaluate the related transaction, that integration would have certain value, but that the deal is not inevitable and would still require relevant approvals and shareholder consent. Musk himself has recused himself from related discussions.
Regarding earnings expectations, all three institutions raised their SpaceX future revenue forecasts due to AI business expansion, but their judgments on growth rates differ significantly. Morgan Stanley raised SpaceX's 2027 revenue forecast from approximately $113 billion to $178 billion, with AI business revenue projections dramatically increased from approximately $81 billion to approximately $146 billion. UBS raised its 2027 revenue forecast from approximately $120.8 billion to $172.7 billion, expecting AI computing leasing to continue as the most important growth driver. JPMorgan's forecast was the most optimistic, raising its 2027 revenue forecast to approximately $254.1 billion and projecting 2028 revenue to further grow to approximately $616.5 billion. The bank also sharply raised its 2027 adjusted earnings per share forecast from $3.45 to $9.88, an increase of 186%. By comparison, Morgan Stanley expects SpaceX's 2027 earnings per share at $3.78, while UBS projects $2.00. The enormous divergence in forecasts among different institutions reflects that the market still has significant disagreements over SpaceX's future computing buildout progress, revenue monetization capability, and profit model.
On valuation, JPMorgan sharply raised SpaceX's end-2027 price target from $240 to $500, primarily based on its latest 2028 profitability forecasts. The bank believes SpaceX is gradually transforming from a traditional space and satellite communications company into a comprehensive technology platform with AI computing infrastructure, AI models and applications, satellite networks, and space transportation capabilities. Morgan Stanley similarly emphasized that the market may not yet fully recognize the value of SpaceX's AI business. The bank believes investors are still viewing SpaceX through the valuation lens of an ordinary AI cloud computing infrastructure supplier, without fully considering its vertical integration advantages in computing, models, applications, and infrastructure. However, Morgan Stanley also cautioned that SpaceX will see approximately 1.3 billion shares released from lock-up on Thursday, with cumulative lock-up expirations of approximately 2.4 billion shares by year-end, which could exert some short-term pressure on the stock price.
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