Is SpaceX a Buy After Its Latest Quarterly Results?

Space Exploration Technologies (NASDAQ: SPCX) just delivered an extraordinary quarter. Revenue more than doubled, the company returned to profitability, and its artificial intelligence (AI) business generated more revenue than its Starlink internet satellite service.

So, is the stock a buy? Not necessarily. Strong earnings suggest a business may be improving. They do not tell us whether its shares are worth the price investors must pay.

To assess whether SpaceX is a buy, investors need to answer two questions: Is the business becoming more valuable? And does the stock price leave room for a worthwhile return?

Image source: Getty Images.

1. Is SpaceX becoming a stronger business?

The latest results suggest it is. In the third quarter, SpaceX generated $14.6 billion in revenue, up 161% from a year earlier. Net income reached $4.4 billion, compared with a $1.1 billion loss a year ago. The results exceeded expectations, and the shares rose.

Beyond these top-line numbers, three developments stand out.

AI is becoming a major growth engine

SpaceX's Super Intelligence segment generated $7.56 billion in quarterly revenue, compared with just $813 million a year earlier. The segment includes AI infrastructure, cloud services and applications, as well as Cursor, the coding software company SpaceX acquired.

This matters because AI gives SpaceX another large market beyond rockets and satellite internet. But investors should remember that acquisitions can boost reported growth in the short run; the key is whether the underlying business can continue to expand and earn attractive returns.

Starlink remains a profitable foundation

SpaceX's Connectivity segment , which includes Starlink, generated $5.25 billion in revenue, up 69% year over year. Operating income reached $2.37 billion.

That combination of growth and profitability is important. Starlink gives SpaceX an established business that can help support its ambitions in newer, more capital-intensive markets.

Starship could strengthen the whole business

SpaceX completed its first revenue-generating Starship mission, deploying 26 Starlink V3 satellites. If the Starship rocket eventually enables larger payloads and lower launch costs, it could make it more economical to expand SpaceX's satellite network.

But that benefit is not yet fully proven. The company still needs to demonstrate that Starship can operate reliably, frequently, and at a competitive cost.

There is also a substantial price tag attached to SpaceX's ambitions. The company made $19.6 billion in capital expenditures in Q3, including $16.4 billion in its Super Intelligence segment. These investments could create enormous value. They could also disappoint if demand, pricing, or execution falls short.

That brings us to the second question.

2. Is the stock worth its price?

This is where investors need to be cautious.

After the earnings announcement, SpaceX was valued at roughly $2 trillion (as of Oct. 23). At that scale, investors are already counting on the company to become much bigger and more profitable. For perspective, annualized revenue (using the latest numbers) ws only $58.4 billion.

To deliver the growth needed to justify that valuation, SpaceX has to invest heavily in the coming years and execute at a world-class level to deliver the required returns.

Moreover, for the stock to deliver attractive returns at an already enormous valuation, SpaceX must keep growing, convert more of that growth into cash, and earn a worthwhile return on its investments. If growth slows or returns disappoint, the shares could struggle even if SpaceX remains an important and successful company.

That is the risk of paying a premium for a business with high expectations: The company can do well while the stock does poorly.

What does it mean for investors?

SpaceX's latest results strengthen the case for its business. AI is scaling rapidly, Starlink continues to grow profitably, and the Starship launch service offers a potentially valuable long-term opportunity.

But I would not buy simply because the company delivered a strong quarter. Before investing, I would want to see continued AI growth, evidence that capital spending is translating into sustainable cash generation, and a valuation that offers room for setbacks.

My view: SpaceX is a business worth watching, but I would wait for a more compelling entry price rather than chase the earnings rally.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.