SpaceX has delivered its first quarterly report since going public, with all three core business segments beating expectations, prompting a wave of analyst upgrades and a systemic reassessment of the space technology giant's investment thesis. The company's total revenue for the second quarter of 2026 reached $7.814 billion, approximately 17% above Goldman Sachs' estimates and 15% above the consensus market forecast. GAAP operating profit also exceeded Goldman Sachs and market expectations by roughly 92% and 91%, respectively.
Goldman Sachs subsequently raised its 12-month price target for SpaceX from $205 to $220, maintaining a Buy rating. With the current share price at $125.33, this implies an upside of about 76%. The firm noted that the stock has fallen roughly 42% from its post-IPO closing peak, making the current risk-reward profile attractive. Citi also maintained a Buy rating and a $200 price target, reiterating its long-term bullish view of over $900. In after-hours trading, SpaceX shares dropped 7.46%.
During the earnings call, management revealed that the company now sees a path to achieving $100 billion in annualized recurring revenue (ARR) by December. It has also significantly accelerated its target for $1 trillion in annual revenue from 2031 to 2030, and possibly as early as 2029, a timeline far ahead of current market expectations.
Artificial Intelligence Emerges as a Major Surprise, Reshaping Valuation Models The AI segment was the quarter's biggest source of outperformance. According to a Citi report, the division generated $2.6 billion in revenue in the second quarter, exceeding Citi's estimate by 24% and the market consensus by 27%. Adjusted EBITDA reached $1.146 billion, a massive swing from Citi's expected $10 million and a directional reversal from the consensus estimate of a $300 million loss. Goldman Sachs analysts Eric Sheridan, Alex Vegliante, and Julia Fein-Ashley noted that the AI beat was primarily driven by cloud service agreement revenue. Management stated that a supply-demand gap for AI computing power is causing each new cloud service contract to have better unit economics than the last, with the payback period for AI capital expenditure now falling below one year. This metric is prompting a market-wide rethink of SpaceX's capital allocation strategy. On capacity planning, management raised its year-end 2027 ground computing target from Citi's prior estimate of 4.2 GW to a range of 5 to 10 GW. It also confirmed that planning for approximately 20 GW of computing capacity is already in place, identifying supply chain constraints as the primary bottleneck, not a lack of demand. As a result, Goldman Sachs significantly increased its AI revenue forecasts for 2026 through 2028, with the 2027 estimate more than doubling from $34.467 billion to $70.336 billion. Citi, citing its earlier initiation report, argued that this quarter's AI surprise is likely to be a recurring catalyst for future quarters, further solidifying the foundation for its long-term price target above $900.
Starlink Growth Continues as Ground Network Plans Emerge The Connectivity segment maintained its strong momentum. Goldman Sachs reported that the division generated $4.291 billion in second-quarter revenue, beating its forecast by 8.6%, while adjusted EBITDA of $2.597 billion exceeded expectations by 12.3%. Consumer Starlink broadband subscribers reached 12 million, slightly above Goldman's estimate of 11.8 million. Management expressed optimism about the backlog of enterprise and government contracts and highlighted that Starlink penetration in the aviation industry remains below 10%, indicating significant room for growth. Goldman Sachs expects cash flow from the Connectivity business in the medium term to be a crucial source of funding for deep-space exploration and AI capital requirements. Citi Research disclosed a new strategic direction: SpaceX revealed that the spectrum it acquired from EchoStar will include a ground network component. Starlink plans to build a terrestrial network using small cells and femtocells to provide connectivity on mobile frequency bands, with the goal of offering superior bandwidth compared to existing operators. Citi believes this positions SpaceX as a potential fourth major competitor in the U.S. mobile market. However, it noted that achieving large-scale deployment would be difficult without a national MVNO agreement. Importantly, Starlink's ARPU was below Goldman's forecast but remained stable quarter-over-quarter. Management indicated that as the company shifts to local market strategies, blended ARPU may decline over time, which aligns with Goldman's earlier expectations.
Starship Progress Accelerates, Key Launch Milestone Ahead The Space segment generated $962 million in second-quarter revenue, surpassing Goldman Sachs' estimate by 17.2%. Adjusted EBITDA came in at a loss of $205 million, a significant narrowing of losses that beat the firm's forecast by 57.1%. Management provided incremental updates on Starship's progress. According to Citi Research, the 14th flight test of Starship is expected to deploy V3 Starlink satellites into operational orbit and has the potential to achieve the first-ever "chopstick" catch of the second stage. Citi views this milestone as a key value unlock event for its long-term $900 price target if successful. Management also confirmed that even if the 14th flight does not achieve it, the goal of synchronously catching both the first and second stages by the end of the year remains intact. Additionally, they stated that the Starship heat shield issue has been resolved and, once validated, no other technical obstacles to achieving full rapid reusability remain. Goldman Sachs noted that SpaceX has established a dominant position in the commercial space launch market, using vertical integration to continuously lower the cost per kilogram to orbit, a model competitors find difficult to replicate. The firm estimates that SpaceX will have five launch pads operational by the end of 2027, which could lead to an upward revision of launch frequency assumptions over the next 12 to 18 months.
Aggressive Forecasts Upgraded, High Capital Spending Remains a Concern This quarter's results prompted Goldman Sachs to make substantial upward revisions to its SpaceX earnings forecasts. The 2026 full-year revenue estimate was raised from $38.244 billion to $47.635 billion, with GAAP EBIT jumping from $1.015 billion to $10.063 billion. The full-year diluted earnings per share estimate was revised from a loss of $0.09 to a profit of $1.00. Looking ahead to 2027, Goldman Sachs expects revenue to expand further to $107.432 billion, an increase of about 55% from its previous model. Using a sum-of-the-parts (SOTP) valuation based on 2029 segment forecasts, Goldman arrived at a base-case price target of $220, implying an upside of roughly 90%, with a bull-case target of $285. Citi's $200 target is based on the average of three valuation methods, while its long-term vision of over $900 rests on the scaled deployment of fully reusable Starship and orbital AI computing. Notably, Goldman Sachs expects capital expenditure to remain elevated. Management stated that quarterly CapEx in the second half of 2026 will be on par with the second quarter, leading Goldman to raise its full-year 2026 CapEx forecast to $64.589 billion. The 2027 CapEx forecast rose further to $189.115 billion, with free cash flow expected to remain negative for several years. Both firms acknowledged that, given the high-return nature of AI capital spending, sustained cash burn does not necessarily pose a major risk. However, they cautioned that governance concentration, founder-related party transactions, and the potential for significant equity dilution are key risk factors that investors must continue to monitor.
