Elon Musk said a merger of his two companies, SpaceX and Tesla, would be “a good idea” and that they had formed special committees to discuss a combination, sending SpaceX shares up 8% in extended trading.
SpaceX on Tuesday posted its first profit as a public company, and Musk said he expected annual recurring revenue of between US$500-billion and $1-trillion by the end of 2027, as demand for its data centre capacity surges on the back of the AI boom.
Musk has in the past tantalised shareholders with the idea of combining SpaceX and Tesla, citing a growing overlap between them. Speculation about the space company buying the electric vehicle maker has gained traction recently, with Barclays suggesting last week that a deal could be announced before Tesla’s annual meeting in December.
“I think it would be a good idea, but it’s really up to the special committees of both companies,” Musk said, in the first official confirmation that the companies were formally talking. “Because I’m a conflicted party, I can’t actually be in the discussions of the special committees,” he told investors on a conference call. The committees are made up of independent directors.
The companies formed the committees at the request of shareholders, who would ultimately need to approve a deal, he added.
“I do think there’s a lot of merit to combining the companies as we are pretty much in the superintelligence singularity, and there’s a lot to be gained from cooperating on developing superintelligence software, chip design, the Terafab obviously, robotics, mass-to-orbit with the Starmind constellation, connectivity,” he said.
Terafab, the two companies’ chip manufacturing joint venture, should produce its first test chip around May or June next year and aims to reach volume production by the third quarter of 2028, Musk said.
Premature to make assumptions
He added that it would be premature to assume a merger would happen, noting that the committees had not agreed on terms and might never do so. Tesla shares rose 1.8% in extended trading.
Musk, the world’s richest person, owns nearly a fifth of Tesla and just under half of SpaceX, and analysts have said a merger would give him control of the combined company.
The talks started in recent weeks and could result in SpaceX acquiring Tesla, a person familiar with the matter told Reuters, declining to be named because they were not authorised to talk to the media. Tesla has been working with an investment bank to advise on the discussions, the person said.
SpaceX’s revenue climbed 161% to $14.58-billion in the three months to 30 September. AI revenue grew almost tenfold to $7.56-billion, mostly from renting out data-centre capacity to developers such as Anthropic, Alphabet’s Google and Reflection AI rather than from its own models.
The third quarter offered the clearest evidence yet that SpaceX’s heavy investment in AI is turning into revenue, even as spending on compute infrastructure remains enormous. Capital expenditure nearly tripled to $19.6-billion, and chief financial officer Bret Johnsen said the company expects $35-billion to $40-billion in the fourth quarter. SpaceX is also planning to borrow $40-billion to buy Nvidia chips, the Financial Times reported this month.
The shift is reshaping a company whose financial engine has long been its Starlink internet business, and whose longer-term ambitions still hinge on getting its Starship rockets into regular service. For now, its main business looks closer to a cloud provider’s than an AI lab’s.
“SpaceX delivered the quarter the bulls wanted, at least on the top line,” said Will Rhind, CEO of asset manager GraniteShares. “The story now is all about AI. The compute contracts signed earlier this year are turning into revenue faster than a lot of people thought.”
The AI business spans the Grok chatbot, social media platform X and a fast-growing data-centre operation. It also turned a profit in the third quarter, against a loss a year earlier.
SpaceX reported net income of $4.4-billion, against a net loss of $1.1-billion a year earlier and analysts’ expectations of a $1.57-billion profit. Adjusted earnings were 45 US cents a share, well ahead of the average estimate of 13 US cents, according to LSEG’s IBES analyst data.
Starlink has continued to add subscribers, helped by more satellite launches and a widening range of consumer, enterprise, aviation, maritime and government services.
It reached 13.6 million subscribers in the third quarter, ahead of the 12.19 million analysts expected. But growth is coming at a price: average monthly revenue per subscriber has fallen from $99 in 2023 to $69, as Starlink expands abroad with cheaper plans. The company has said that expansion beyond the wealthiest countries could push average revenue per user lower over time.
Starship uncertainty
South Africa is not yet one of those markets. Starlink still has no licence here, and Icasa has said that recognising equity-equivalent investment programmes, the route SpaceX wants to use instead of selling 30% of its local business to historically disadvantaged groups, would require a change to the Electronic Communications Act.
Starship, SpaceX’s next-generation reusable rocket, has yet to enter commercial service. It is expected to carry higher-bandwidth Starlink satellites and orbital AI computing infrastructure, and turning it into a reliably reusable vehicle is central to SpaceX’s longer-term strategy. The space segment, which includes commercial launches, government missions and Starship development, remains a significant source of costs and uncertainty. — Akash Sriram, Joey Roulette, Max A Cherney, Aditya Soni and Milana Vinn, (c) 2026 Reuters, with additional reporting (c) 2026 NewsCentral Media
