SpaceX Earnings: We Raise Our Fair Value Estimate on Scaling Data Centers, But Is the Stock a Buy?

SpaceX released its third-quarter earnings report on Oct. 20. Here’s Morningstar’s take on SpaceX’s earnings and stock.

Key Morningstar Metrics for SpaceX

• Fair Value Estimate
  : $70.00
• Morningstar Rating
  : ★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Very High

What We Thought of SpaceX’s Q3 Earnings

SpaceX’s third-quarter revenue grew 161% since 2025 to $14.6 billion, led by a sequential quintupling of AI revenue, driven by neocloud rentals. Starlink revenue rose 69.5% and contributed $2.4 billion in operating profit, followed by $431 million in operating income from AI and the launch business breaking even.

Why it matters: Notwithstanding its sizable market opportunity for rapid, profitable growth in Starlink, the widest range of potential outcomes for SpaceX’s future lie in its AI ventures, which are currently predicated on rapidly deploying computing capacity and renting it out.

• SpaceX’s rapid buildout of AI computing capacity and ability to rent it out at favorable rates is a success story. However, we do not think it likely that demand will outstrip supply forever, especially the more capacity is deployed.
• In our forecasts, we investigated a few possible long-term payoff profiles of heavy investments in AI infrastructure, mirroring questions and uncertainty investors have grappled with in recent months and weeks that drove volatility in AI-related shares.

The bottom line: We raised our fair value estimate for narrow-moat SpaceX to $70 per share from $62, reflecting its increased near-term success in scaling terrestrial data centers, offset by a reappraisal of the long-term returns of AI services on the hefty investments required to deploy them. We see SpaceX’s shares, down more than 2% since earnings but still trading at around twice our fair value estimate, as overvalued.

Coming up: We weren’t surprised to hear that SpaceX and Tesla have formed board committees to explore a possible business combination. We think a deal could simplify the firms working together on many projects, but it depends on terms satisfactory to a majority of Tesla shareholders.

• We don’t think the combination is inevitable, but would judge it highly likely to take place, especially the longer SpaceX stock remains richly priced.

The following are excerpts from Morningstar’s company report on SpaceX.

Fair Value Estimate for SpaceX

With its 1-star rating, we believe SpaceX stock is significantly overvalued compared with our long-term fair value estimate of $70. We value the competitively advantaged and fast-growing space and connectivity businesses together at $35 per share, in addition to $7 per share of the company’s cash on hand.

In our most likely $70 base-case scenario, the AI business adds $28 per share. In this case, orbital data centers prove viable, also benefiting from SpaceX’s decreasing cost to launch large payloads on Starship, and the company eventually deploys and commercializes around 31% of our forecast AI computational capacity. The project requires more engineering to succeed, and we see SpaceX as best-positioned to pursue it. We deem this scenario as most likely (though far from guaranteed), at a 55% probability.

Read more about SpaceX’s fair value estimate.

Economic Moat Rating

We assign SpaceX a narrow economic moat. The firm has established a strong cost advantage in both its space and connectivity segments, which respectively represented 13% and 60% of company revenue by mid-2026, and would merit wide moat ratings as a stand-alone pair, but the uncertainty and risk of value destruction tied to the company’s heavy investments in AI businesses cap its moat rating at narrow.

We believe SpaceX’s demonstrable, durable, and widening cost advantage in its space and connectivity businesses stems from the extensive research and development it conducted to design its rockets to be reusable, lightweight, and powerful, making them cheaper to operate than other systems. We believe these advantages are likely to endure despite imitators because of SpaceX’s absolute cost advantage and the long lead it has in the race, as each successive launch, especially when reusing existing equipment, further lowers SpaceX’s average cost.

Read more about SpaceX’s economic moat.

Financial Strength

SpaceX’s balance sheet reflects an aggressive investment phase, supported in part by some strong underlying cash-generating businesses and an IPO cash infusion. As of the end of the third quarter of 2026, SpaceX had $38.8 billion in debt and, after raising $86 billion during its IPO, about $90 billion in cash and securities on the balance sheet, resulting in a net cash position of around $12.5 billion or $51 billion including marketable securities. In late October, SpaceX raised $40 billion in debt to lease data center equipment.

We expect the Starlink business to be the company’s main cash flow contributor in the near term and project that operating profits will exceed $5 billion in 2026. The net cash position after the IPO and the strength of the firm’s core business give us reason for optimism about the firm’s financial position in the coming years despite its aggressive investment agenda and multi-billion-dollar price tags for most of its projects.

Read more about SpaceX’s financial strength.

Risk and Uncertainty

Our Uncertainty Rating for SpaceX is Very High, primarily because it has a very wide range of potential future financial outcomes. The company faces substantial risks related to execution, technological evolution, regulation, corporate governance, and key-person dependency.

SpaceX’s potential depends on successful execution by management across several fronts. For instance, the Starship project, which underpins the firm’s ambitions to continue scaling Starlink capacity, has yet to establish or demonstrate scalable upper stage reusability. Starlink’s long-term scalability also faces significant regulatory and technological uncertainties, many of which are outside management’s control.

SpaceX’s corporate governance warrants investor scrutiny. With CEO Elon Musk retaining majority voting control through the company’s dual-class share structure, minority shareholders will have severely limited ability to influence governance outcomes or challenge future transactions or other corporate decisions. Musk’s simultaneous leadership of multiple companies further complicates SpaceX’s governance risk because its charter renounces any expectation that he would prioritize opportunities for SpaceX, all of which amplify the firm’s key-person risk.

Read more about SpaceX’s risk and uncertainty.

SPCX Bulls Say

• SpaceX has transformed the economics of space launch and dominates the market for lifting spacecraft into orbit, and it has a decade lead on most competitors in experience and payload launch volumes.
• Loyal holders of companies run by Elon Musk have a very long time horizon and are often willing to look past interim milestones toward the prospects of big bets on moonshot projects and the grander vision on the horizon.
• Starlink is the market leader in satellite communications and continues to add subscribers and capacity at a rapid, profitable clip.

SPCX Bears Say

• The company’s aggressively lofty valuation implies investors will have to wait decades for earnings to grow into SpaceX’s multiples.
• The company’s dual-class share structure means minority shareholders will have severely limited ability to influence governance outcomes or challenge future transactions or other corporate decisions.
• In the year following SpaceX’s IPO of just under 5% of its shares, the remaining 95% will become available for sale by insiders to the public, which could test marginal demand and drive volatility in the stock price.

This article was compiled by Colin Laidley.