SpaceX (SPCX.US) earnings massively beat expectations! JP Morgan doubles price target to $500; Morgan Stanley and UBS Group AG bullish on long-term prospects

SpaceX (SPCX.US) reported third-quarter 2026 results that significantly beat Wall Street expectations, with the rapid expansion of its artificial intelligence (AI) computing business serving as the main growth driver. As the company sharply raised its future computing buildout targets, JPMorgan, Morgan Stanley, and UBS Group AG successively published research reports on October 21, expressing bullish views on SpaceX's long-term prospects in AI infrastructure, Starlink satellite communications, and the Starship business. Among them, JPMorgan sharply raised its price target from $240 to $500, Morgan Stanley maintained its $300 price target, and UBS Group AG raised its price target from $210 to $230. All three institutions assigned positive ratings to SpaceX. JPMorgan and Morgan Stanley maintained "Overweight" ratings, while UBS Group AG maintained a "Buy" rating. Based on SpaceX's closing price of $147.79 on October 20, the price targets from the three institutions imply potential upside of approximately 238%, 103%, and 56%, respectively. SpaceX achieved revenue of $14.575 billion in the third quarter, up about 161% year over year and about 87% quarter over quarter, exceeding the market expectation of about $12.8 billion. Adjusted EBITDA reached $8.809 billion, also significantly above market expectations. Morgan Stanley noted that the company's revenue and adjusted EBITDA beat consensus by approximately 14% and 29%, respectively, and all three major business segments delivered revenue above expectations. Among them, the AI computing business was particularly outstanding. SpaceX's Super Intelligence business generated third-quarter revenue of $7.6 billion, a sharp increase from $2.6 billion in the previous quarter and above the market expectation of approximately $6.4 billion to $6.5 billion. UBS Group AG noted that the business's adjusted EBITDA reached $5 billion, with margin rising to 66%, up from 45% in the previous quarter. This growth was mainly driven by the rapid expansion of the AI cloud computing rental business, including the Anthropic-related collaboration project entering a full revenue contribution phase, Alphabet Inc. Class C cloud business beginning to contribute revenue, and additional revenue from the completed acquisition of AI coding company Cursor. Morgan Stanley noted that Cursor contributed approximately $608 million in revenue in its first partial quarter after consolidation. More importantly, SpaceX management released computing expansion plans on the earnings call that far exceeded prior market expectations. By the end of the third quarter, the company had approximately 1.7 gigawatts (GW) of computing capacity, expected to increase to about 2.2 GW by the end of October, and plans to reach 2.5 GW to 3 GW by the end of 2026. Chief Executive Officer Musk said he is "highly confident" about adding approximately 10 GW of computing capacity in 2027, implying that the company's total computing scale could reach approximately 13 GW by the end of next year. At the same time, SpaceX also plans to build approximately 20 GW of power and cooling infrastructure by the end of 2027, reserving space for further expansion. Musk said the main constraint on computing expansion is no longer AI chips themselves, but rather the pace of construction of power supply, cooling systems, and related infrastructure. On the hardware deployment side, SpaceX is currently deploying approximately 200,000 NVIDIA Corporation GB300 chips per month and plans to shift in 2027 to computing buildout based primarily on the next-generation Vera Rubin platform. The company also plans to deploy approximately 440,000 Vera Rubin GPUs by the end of the second quarter of 2027, building a large-scale AI computing cluster for Grok model training. JPMorgan believes the commercial value of the Vera Rubin platform could be significantly higher than that of the previous generation. As deployment of the new-generation chips accelerates, SpaceX will not only be able to expand rentable computing capacity but also improve profitability through higher revenue per unit of computing power. According to management disclosures, prices for newly signed computing rental contracts at SpaceX are already slightly above the upper end of the previous $30 to $50 per watt range, and the payback period for newly deployed projects is less than one year. UBS Group AG noted that Musk expects that, as computing rental prices continue to rise, the payback period for some projects could shorten to about six months next year. Musk also said that demand from large cloud service providers for SpaceX's computing power is extremely strong, and that the company's existing and planned computing resources could be fully rented by customers even if expanded several times over. Against this backdrop, SpaceX management suggested that by the end of 2027, the company's annualized recurring revenue (ARR) could reach $500 billion to $1 trillion. However, Morgan Stanley specifically noted that this figure is a long-term business vision raised by Musk on the call, rather than financial guidance issued in the company's formal earnings announcement, and its realization depends heavily on the pace of computing buildout, pricing power, and commercialization of AI products. However, rapid expansion also means capital expenditures will surge. SpaceX expects fourth-quarter 2026 capital expenditures to reach $35 billion to $40 billion, far above the approximately $19.6 billion level in the third quarter. JPMorgan expects SpaceX's capital expenditures in 2027 could reach approximately $300 billion; Morgan Stanley raised its 2027 capital expenditure forecast from $161 billion to approximately $278 billion. UBS Group AG's forecast is even more aggressive, expecting 2027 capital expenditures could reach approximately $361.9 billion. All three institutions believe that massive capital needs will become an important test for SpaceX's future growth. However, SpaceX management said the company has an advantage in data center construction costs, with capital investment per 1 GW of computing capacity potentially only about $35 billion, below the approximately $50 billion to $60 billion level of other large computing suppliers. JPMorgan noted that SpaceX is currently not considering raising funds through new share issuance, but instead plans to use debt financing channels and growing operating cash flow to support expansion. But the bank also acknowledged that realizing such a massive computing buildout plan requires power supply, infrastructure construction, financing, and customer demand to all proceed smoothly at the same time. In addition to the AI business, SpaceX's Starlink satellite communications business also maintained growth. In the third quarter, SpaceX's communications business revenue reached $5.2 billion, up 70% year over year, and adjusted EBITDA reached $3.5 billion, up 82% year over year. Starlink added approximately 1.6 million consumer users in the quarter, bringing total users to 13.6 million. However, this user growth was below market expectations, mainly due to factors such as the transition of user terminal products and inventory constraints. At the same time, average revenue per user (ARPU) for consumer users rose 5% quarter over quarter to $69, reflecting the company's greater focus on mature markets with stronger payment capacity. Morgan Stanley noted that although user growth fell short of expectations, higher ARPU drove consumer business revenue above expectations. Looking ahead, SpaceX plans to use next-generation Starlink V3 satellites to increase network capacity and accelerate expansion into the mobile communications market. The company expects to begin deploying Mobile V2 satellites in 2027 and aims to launch related services in early 2028 using newly acquired spectrum. In the space launch business, SpaceX generated revenue of approximately $1.77 billion in the third quarter, up 6% year over year. The company's 14th Starship test flight successfully reached orbit and deployed 26 Starlink V3 satellites, marking further progress by the Starship program toward commercial operations. The market's next key focus will be the 15th Starship test flight expected in November. At that time, SpaceX plans to attempt recovery of both the Super Heavy booster and the Starship upper-stage spacecraft. If successful, it would be an important milestone toward full reusability of Starship and could further reduce satellite deployment and space transportation costs. In addition, Musk also responded on the earnings call to the possibility of a potential merger between SpaceX and Tesla, Inc. (TSLA.US). He said the two companies have established a special committee to evaluate the relevant transaction, that there is some value in combining the two, but that a deal is not inevitable and would still require relevant approvals and shareholder consent. Musk himself has recused himself from the discussions. On earnings expectations, all three institutions raised their future revenue forecasts for SpaceX due to AI business expansion, but their views on growth rates differ markedly. Morgan Stanley raised SpaceX's 2027 revenue forecast from approximately $113 billion to $178 billion, including a sharp increase in its AI business revenue forecast from approximately $81 billion to about $146 billion. UBS Group AG raised its 2027 revenue forecast from approximately $120.8 billion to $172.7 billion, expecting the AI computing rental business to remain the most important growth driver. JPMorgan's forecast is the most optimistic, raising its 2027 revenue forecast to approximately $254.1 billion and expecting revenue to grow further to approximately $616.5 billion in 2028. The bank also sharply raised its 2027 adjusted earnings per share forecast from $3.45 to $9.88, an increase of 186%. By comparison, Morgan Stanley expects SpaceX's 2027 earnings per share to be $3.78, while UBS Group AG expects $2.00. The huge differences in forecasts among institutions reflect that the market still has significant disagreement over SpaceX's future computing buildout progress, revenue monetization capability, and profit model. On valuation, JPMorgan sharply raised SpaceX's end-2027 price target from $240 to $500, mainly based on its latest forecast for 2028 profitability. The bank believes SpaceX is gradually transforming from a traditional aerospace and satellite communications company into a comprehensive technology platform with AI computing infrastructure, AI models and applications, satellite networks, and space transportation capabilities. Morgan Stanley likewise emphasized that the market may not yet fully recognize the value of SpaceX's AI business. The bank believes investors are still viewing SpaceX according to the valuation approach for ordinary AI cloud infrastructure suppliers, without fully considering its vertical integration advantages in computing power, models, applications, and infrastructure. However, Morgan Stanley also cautioned that SpaceX will see approximately 1.3 billion shares released from lock-up on Thursday, with a cumulative unlock of approximately 2.4 billion shares by year-end, which may create some short-term pressure on the stock price.