SpaceX Earnings: 3 Numbers Long-Term Investors Should Watch

The third quarter of the calendar year, which corresponds to most public corporations' fiscal third quarters, just ended. In the coming weeks, many companies will be releasing their financial results for this period. One of them will be Space Exploration Technologies (NASDAQ: SPCX), the rocket company that broke the record for the largest IPO ever in June. Many investors have high expectations for SpaceX, but will the company live up to them? It's too early to tell, but several metrics in the company's next earnings update could provide clues. Let's consider three of them.

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1. How fast will AI revenue grow?

SpaceX has identified artificial intelligence (AI) as its largest opportunity by far. The company has said it sees a $26.5 trillion total addressable market (TAM) in AI, which accounts for the overwhelming majority of its $28.5 trillion TAM across all three segments. And CEO Elon Musk has also said that the company's internal revenue projection for 2030 is $1 trillion, with most of that coming from its AI segment. SpaceX is nowhere near there yet. In the second quarter, the company's AI revenue was $2.6 billion. But it did grow by an impressive 247.5% year over year. Total revenue was $7.8 billion, up 92% year over year.

It will be interesting to see if, during the third quarter, SpaceX's AI business maintains a healthy rate of sales growth. If revenue growth in this segment decreases sharply and falls short of analyst projections, the company's shares might drop off a cliff.

2. Pay attention to capital expenditures

During the second quarter, SpaceX's capex across all three of its segments was $18.4 billion, representing a 550% increase compared to the year-ago period. The company's AI capex was responsible for most of that. It came in at $15.8 billion, more than six times the capex of the two other businesses combined and an increase of about 2013% compared to the prior-year quarter. SpaceX's massive AI-related spending isn't surprising, given the opportunities it has identified ahead, and during the second quarter, the company's bottom line improved significantly year over year despite that spending.

Its net loss of $541 million was much better than the $1 billion loss reported in the year-ago period. But how much more will SpaceX spend on its AI-related ambitions, and will it be able to post a profit, as Wall Street expects (on average), despite that spending? Investors should watch that closely when SpaceX releases its third-quarter report.

3. Connectivity business growth

SpaceX's most profitable segment right now is its connectivity business. In the second quarter, connectivity revenue was $4.3 billion, an increase of almost 66% year over year. It generated an operating income of $1.7 billion, up 79% year over year. SpaceX's two other units posted operating losses. One key metric to watch in connectivity will be Starlink subscribers.

Starlink's average revenue per user has decreased in recent years as SpaceX continues to expand the service and offer lower-price options, and that's not a problem as long as it continues to grow its installed base of paying subscribers. In the second quarter, Starlink subscribers doubled year over year to 12 million. Will the service continue expanding its installed base rapidly? Investors should monitor that in the upcoming quarterly update.

Is SpaceX stock a buy?

There is definitely a lot to like about SpaceX. It is a conglomerate that operates across three segments and is the undisputed leader in two of them: satellite-based connectivity and space launch. The company has helped pioneer reusable rockets, which have allowed it to reduce space launch costs considerably, while launching far more satellites into orbit than any of its competitors. SpaceX is still innovating. Its next-gen Starship rocket is the biggest ever built.

It is designed to be fully reusable and could unlock significant opportunities across all three of the company's segments. So far so good. However, the stock hasn't gained much since its market debut, partly due to valuation concerns. SpaceX trades at 200x forward earnings. SpaceX is a great business, but its share price might be a bit too steep right now. I'd wait for a significant dip before even considering initiating a position.

Prosper Junior Bakiny 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.