SpaceX's rockets brought in under $1B last quarter — Starlink and AI compute are the real business

SpaceX’s first public earnings report reveals a company whose identity is completely disconnected from its name. The space launch business? It didn’t crack a billion dollars in quarterly revenue, contributing just over 10% of the total. The rockets are effectively a side hustle.

The real money is in two places. Starlink, the satellite internet service, delivered $4.2 billion in revenue and was the only segment to post an operating profit. Then there’s the AI compute leasing operation, which wasn’t even the original plan. Musk built the Colossus 1 data center in Memphis for Grok, his perpetually problematic chatbot that has referred to itself as MechaHitler and generates non-consensual imagery. But xAI couldn’t run the facility effectively — a mix of old and new chips created bottlenecks, and latency issues made training in-house models difficult — so they pivoted to renting it out. Only 10% of the compute SpaceX builds actually goes to Grok.

That pivot has landed deals with Google, Anthropic, Reflection AI, and Cursor. CFO Bret Johnsen told analysts the company is on track for $100 billion in annualized revenue run rate by December, with Musk calling that figure conservative. But the spending is staggering: $15.8 billion on AI infrastructure in the second quarter alone. Analyst Alexander Potter expects that number to hit $65 billion next year.

The problem with being in the bare-metal compute business is that it’s a commodity. More data centers mean more available compute, which drives down what companies can charge. And Musk’s ambitions don’t stop on the ground — he’s proposed an orbital data center of up to 1 million satellites to the FCC, an application so light on technical detail it reads more like a press release than a plan. Before figuring out data centers in space, he might want to get the terrestrial ones running smoothly.