3 Things You Need to Know Before Buying SpaceX
Key Points
The Starlink connectivity service generates recurring revenue that results in a stellar 45% operating margin.
Huge capital spending to expand AI compute puts SpaceX in the same conversation as the major hyperscalers.
Colonizing Mars is part of Elon Musk’s grand vision, and the financial impacts of this goal are a complete unknown.
Anthropic's upcoming initial public offering is getting a lot of the market's attention right now. But it wasn't that long ago when Space Exploration Technologies (NASDAQ: SPCX) was the talk of the town. Now valued at $1.7 trillion, making it the world's eighth-most-valuable business, there's certainly a lot of excitement surrounding the company.
Given his track record, Elon Musk seems to automatically get the benefit of the doubt from capital markets. As a result, investors might not hesitate to immediately add this stock to their portfolios in the hopes of achieving massive returns. However, this is a good place to step back.
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Here are three things you need to know before buying SpaceX.
Image source: The Motley Fool.
1. Starlink is the profit engine
Three segments drive SpaceX's financial performance. It generates revenue from its space (launch infrastructure), connectivity (Starlink internet service), and super intelligence (artificial intelligence solutions) operations. All are dependent on the company's ability to continue increasing payload capacity while lowering costs, as this supports the economic and strategic flywheel that enables overall success.
During the most recent quarter (Q3 2026 ended Sept. 30), Starlink collected $5.2 billion in revenue, rising 69% compared to the year-ago period. This was driven by 89% growth in consumer subscriptions, now totaling 13.6 million. Enterprise and government sales for this segment climbed 91%.
Starlink is the profit engine, and it's not even close. Its operating income was $2.4 billion in the most recent quarter, representing the bulk of SpaceX's profit. This resulted in a division-level operating margin of 45%.
The company's scaled connectivity platform brings in high-margin, recurring revenue with low marginal costs once the satellites are deployed. The financial windfall this produces supports SpaceX's other projects.
2. AI dominates SpaceX's corporate strategy
The major hyperscalers are Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle. They're investing incredible amounts of capital, expected to exceed $1 trillion in 2027 in total, to build data centers that power artificial intelligence (AI) model training and inference. It's these businesses that sit right at the center of the AI boom.
SpaceX might deserve to be in this conversation. This segment's capital expenditures totaled $40 billion on computing capacity during the last nine months. And it rents this out to customers. Notable clients include Anthropic and Google Cloud.
In Q3, super intelligence posted an 830% year-over-year revenue surge to $7.6 billion. It now accounts for more than half of SpaceX's total top line.
The business eventually wants to deploy AI data centers in space, where abundant solar power is available. Musk said in January that "the lowest cost place to put AI will be space, and that'll be true within two years, maybe three at the latest."
3. The ultimate goal is out of this world
To say that Musk works on ambitious projects might be underselling it. But nothing is as out-of-this-world as what SpaceX is ultimately trying to do. It's about "making humanity multiplanetary."
This strategy depends on the Starship project, which is the next rocket platform undergoing testing and waiting to become fully operational, being successful. This would serve as the main vehicle to conduct space missions. The business is betting on these to be reusable with minimal maintenance, handle heavy payloads, and drive lower launch costs.
Put aside whether you believe that colonizing Mars is even remotely realistic, and consider how it would impact SpaceX's economics.
The company would surely burn massive amounts of capital building what is essentially an interplanetary transportation network, not to mention the uncertainty around feasibility, progress, and timing. Additionally, there's a lot we still don't know about Mars.
The bull case is that SpaceX becomes a monopoly that controls all the digital infrastructure for a hypothetical Mars colony. And the business would act like a toll collector on anything moved between Earth, Mars, and deep space.
This is a complex enterprise. Investors now have some background knowledge of SpaceX.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle. The Motley Fool recommends Space Exploration Technologies. The Motley Fool has a disclosure policy.