Elon Musk told investors on a conference call that special committees at both SpaceX and Tesla have been created to explore a potential merger of the two companies. While he described the idea of combining the firms as “a good idea,” Musk emphasized that any transaction would be subject to the deliberations of those committees and would ultimately require shareholder approval.
Official confirmation and market reaction
The remarks, made on Tuesday, marked the first official acknowledgment that the two businesses are formally discussing a union. Musk said, “Because I’m a conflicted party, I can’t actually be in the discussion of the special committees,” underscoring his hands‑off role in the process. Following the comments, SpaceX shares rose 4.9% in extended trading.
Speculation about a merger has intensified in recent weeks. Barclays analysts suggested in the prior week that an announcement could arrive before Tesla’s annual meeting in December. Musk has previously hinted at the notion, pointing to growing overlap between the two enterprises.
SpaceX reports first profit, AI revenue surges
At the same time the merger talks were disclosed, SpaceX released its quarterly financial results, showing its first profit as a publicly listed company. Revenue for the three months ended September 30 jumped 161% year‑on‑year to $14.58 billion. The surge was driven largely by artificial‑intelligence (AI) services, which generated $7.56 billion—almost a tenfold increase from the prior year.
AI earnings stem primarily from renting data‑centre computing capacity to developers such as Anthropic, Alphabet (Google’s parent) and Reflection AI, rather than from sales of SpaceX’s own AI models. CFO Bret Johnsen said the company expects annual recurring revenue of about $100 billion by the end of 2026, while Musk added an off‑script projection that SpaceX could reach between $500 billion and $1 trillion in annual recurring revenue by the end of 2027.
The firm posted net income of $4.4 billion, a reversal from a $1.1 billion loss a year earlier, and comfortably beat analysts’ average expectation of a $1.57 billion profit. On an adjusted per‑share basis, SpaceX earned 45 cents, well above the 13‑cent estimate compiled by IBES.
Will Rhind, chief executive of asset manager GraniteShares, described the quarter as delivering “the top line the bulls wanted,” noting that the compute contracts signed earlier in the year are converting into revenue faster than many had anticipated.
Starlink growth, Starship development and longer‑term outlook
SpaceX’s satellite‑internet arm, Starlink, continued to expand, reporting 13.6 million subscribers in the quarter—exceeding the analyst consensus of 12.19 million. However, average monthly revenue per subscriber fell from $99 in 2023 to $69 in the latest quarter, reflecting the company’s push into markets with lower price points. Musk warned that further entry into countries with limited purchasing power could depress average revenue per user even more.
The company’s longer‑term strategy also hinges on Starship, its next‑generation reusable launch system. Although Starship has not yet entered commercial service, it is expected to launch more advanced Starlink satellites and support AI‑computing infrastructure in orbit. During the most recent test flight, Starship successfully deployed several Starlink satellites before an engine issue caused the mission to end hours earlier than planned.
While Falcon rockets remain active across commercial and government missions, SpaceX has increasingly prioritized launching its own satellites over carrying third‑party payloads. This shift, combined with a rapidly growing AI business and expanding connectivity services, has altered the company’s financial profile and amplified interest in a possible merger with Tesla.
Capital spending in the third quarter reached $19.6 billion, of which $16.4 billion was allocated to AI‑related computing infrastructure—a near‑tripling of the previous level. The firm expects to spend between $35 billion and $40 billion on capital expenditure in the fourth quarter, reflecting the scale of its AI and rocket development programs.
Analysts such as Daniel Newman, CEO of the Futurum Group, observed that the strength and diversification of SpaceX’s business make a merger with Tesla feel “imminent,” citing the company’s hyperscale AI operations as a source of operating leverage that could benefit both the satellite and launch segments.
In summary, Musk’s public endorsement of a potential SpaceX‑Tesla merger coincides with SpaceX’s first profit, a dramatic rise in AI revenue, and ongoing expansion of its Starlink subscriber base. The formation of special committees signals that the discussion has moved beyond speculation, though any final deal will still need the approval of both companies’ shareholders.
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