SpaceX's earnings beat runs into a $116bn problem

SpaceX Corp (NASDAQ:SPCX) did almost everything investors had asked of it in its first quarterly report as a public company, and the shares fell anyway. Revenue of $7.8 billion for the April to June quarter came in ahead of the $6.81 billion analysts had pencilled in, and adjusted earnings before interest, tax, depreciation and amortisation of $3.5 billion beat a $2 billion consensus. The net loss of $541 million was a fraction of the $1.9 billion forecast and a marked improvement on the $4.3 billion lost in the first quarter. The shares still fell 7.5% in after-hours trading.

The figure that unsettled investors was capital expenditure. SpaceX spent $18.4 billion in the quarter against forecasts of roughly $13 billion, with close to $16 billion of it directed at xAI, the artificial intelligence business Elon Musk folded into the group before listing. That follows more than $10 billion in the first quarter, and analysts now expect the full-year total to pass $45 billion. Revenue from the AI segment grew 247%, while Starlink, the satellite broadband arm and the group's only profitable division, grew 66%. The problem is that the spending is running well ahead of the returns, and investors want evidence that the gap eventually closes. Musk's guidance on the analyst call did little to settle that argument, given he pulled forward his target for $1 trillion in annual revenue to 2030 from 2031 and floated 2029 as possible, against FactSet estimates of about $207 billion for that year.

The bigger issue arrives on Thursday. Employees and early investors become free to sell 911.5 million shares, equivalent to 12% of the company and more than the 640 million current...