SpaceX (SPCX.US) earnings report reversal: SI increased revenue marginally, Link monopolized the majority of profits

According to Woofun AI, SpaceX (SPCX.US) released its second quarterly financial report after listing, showing an overall strong trend of 161% year-on-year increase in revenue and turning losses into profits. Chief Financial Officer Brett Johnson pointed out in a conference call that there is a significant business line mismatch between revenue growth, profit sources, and capital investment: the core driving revenue is not the main profit contributor, while huge capital expenses are concentrated on high-growth businesses.

This structural contrast reveals the typical characteristics of the company currently in a period of high investment expansion, that is, sacrificing short-term profit margins in exchange for long-term market share and technical barriers. Although the aerospace business continues to grow, its marginal impact on total growth has been drastically reduced, and the Group's growth engine has clearly switched to emerging fields.

This fragmentation of financial performance requires investors to go through consolidated statements and go deep into each segment data to understand their actual profit quality and cash flow health, rather than just focusing on top-level net profit figures.

The Super Intelligence (SI) business, the former AI division, has become the absolute main force driving the Group's revenue expansion. By company classification, more than 90% of SI's revenue comes from solutions and infrastructure. This structure indicates that its revenue structure includes not only model subscriptions, but also cloud services and infrastructure businesses. Therefore, it is inaccurate to simply summarize SI as “selling GPUs” because the company does not separately disclose revenue details for computing power leases, models, and software. SI's growth was driven by new cloud service agreements starting to contribute revenue, the AI programming tool Cursor and chart, and increased adoption of the Grok model among enterprises and consumers. Among them, Cursor contributed $608 million in revenue during the consolidation period, but since the announcement did not break down the incremental volume brought about by various businesses, it was not possible to calculate a strict endogenous growth rate based on this.

Notably, although SI contributed three-quarters of the Group's year-on-year increase in revenue, its profitability was extremely low. The division's operating margin was only 5.7%, and that figure included the $1,217 billion equity incentive costs associated with Cursor's acquisition.

This characteristic of high revenue and low profit reflects the asset-heavy nature of AI infrastructure construction and the high cost of R&D and integration. The maturity of its business model has yet to be verified in subsequent quarters.

In contrast, the connectivity business (Link) is the Group's current profit ballast. According to data compiled by Woofun AI, the Link business contributed about 85% of the Group's operating profit, and its division operating margin reached 45.1%, far exceeding SI's 5.7%. Link's business revenue increased 69% year over year, and operating profit increased 99% year over year, showing strong scale effect and profitability. This business covers revenue from the satellite internet service Starlink to consumers, businesses, and the government, and the entire segment's profit cannot simply be equated with household broadband subscription revenue.

In fact, corporate and government revenue increased 91% year over year, faster than consumer revenue of 57%, and aviation cooperation and government customer demand became an important driving force. In terms of user size, Starlink's consumer subscribers increased to 13.6 million, up from 12 million in the previous quarter, and the average monthly revenue per household (ARPU) rebounded from $66 to $69.

Although subscriber data only covers the consumer business, the recovery in ARPU and rapid growth on the corporate side confirm the stability of Link's business chassis and the improvement in profitability. This steady cash flow generation capability provides a key financial buffer for the Group's other high-risk and high-investment businesses.

Judging from an in-depth financial analysis, SpaceX's net profit for the third quarter was US$4.404 billion, higher than the Group's operating profit of US$2,791 million. The difference was mainly due to net non-operating income of US$1,025 million and income tax benefits of US$390 million, including Bitcoin earnings not separately listed. What you need to be wary of is that the cumulative net loss for the first three quarters was 413 million US dollars. Reversing losses in a single quarter does not mean that profits have been made since the beginning of the year. In terms of capital expenditure, SI absorbed 84% of the investment. The size of a single quarter was more than double its revenue for the current quarter, and capital expenditure required cash payments, which was different from equity incentive expenses. Brett Johnson's capital expenditure guidance for the next quarter is 35 billion to 40 billion US dollars, which is close to double the actual investment this season, mainly for computing power and other infrastructure construction.

However, operating cash flow covered only about half of capital expenses this quarter, and simplified free cash flow was negative. By the end of the third quarter, SpaceX held $89.855 billion in cash and marketable securities, enough to handle short-term liquidity pressure. This quarter, SpaceX's new revenue mainly came from SI. Operating profit mainly came from the connectivity business, and capital expenditure also mainly went to SI. This strategic pattern of “nurturing SI with Link” will continue to test its capital allocation efficiency and ability to convert return on investment in the next few quarters.