SpaceX stock is sinking 7% after earnings: can it make a comeback?

SpaceX stock SPCX fell sharply on Wednesday after the company reported stronger-than-expected second-quarter results but disclosed a steep increase in artificial intelligence spending.

The stock dropped as much as 13% on Wednesday before paring some of those losses to trade around 7% lower at the time of writing.

The massive decline today is reversing a two-day rally that had added more than $250 billion to the company's market value earlier in the week.

SpaceX reported a second-quarter loss of 9 cents per share, narrower than the 26-cent loss expected by analysts surveyed by LSEG. Revenue rose to $7.81 billion, exceeding the consensus estimate of $6.93 billion.

Despite the stronger-than-expected results, investors focused on the company's accelerating investment in AI infrastructure.

AI spending weighs on sentiment

SpaceX said capital expenditures increased sixfold to $18.4 billion during the second quarter, with most of the spending directed toward artificial intelligence initiatives.

AI investment totaled more than $23 billion during the first six months of the year, up from $3.3 billion in the same period a year earlier.

Capital spending also increased across the company's connectivity and space businesses.

The spending comes as investors across the technology sector scrutinize whether companies' multibillion-dollar AI investments are translating into meaningful financial returns.

Investors largely overlooked the earnings beat, focusing instead on the sharp acceleration in AI spending.

During the earnings release, Chief Executive Elon Musk said the company now expects to generate $1 trillion in annual revenue by 2030, bringing forward its previous forecast by one year.

SpaceX also forecast more than $100 billion in annual recurring revenue across its businesses by the end of this year, led by growth in cloud services.

Quarterly revenue was supported by the continued expansion of the Starlink satellite internet business, which remains the company's only profitable operating segment.

Lock-up expiration adds another overhang

Investors are also preparing for another potentially significant event on Thursday, when the first tranche of insider lock-up restrictions expires.

The expiration will allow up to 911.5 million shares to become eligible for sale, increasing the number of publicly tradable shares to as many as 1.55 billion from roughly 639 million currently available, according to the company's IPO prospectus.

The scheduled release comes after a volatile trading period in which SpaceX shares have fallen well below their $135 IPO price following their initial post-listing surge.

The company's long history as a private business, together with its acquisition of xAI earlier this year, has left it with a broad shareholder base, many of whom continue to hold substantial unrealised gains despite the recent decline in the share price.

Analysts remain constructive

Despite the market's reaction, several Wall Street firms maintained positive ratings on the stock.

Bank of America said SpaceX exceeded expectations on both revenue and profitability while describing management's communication around the quarter as constructive.

Analyst Ronald Epstein said concerns over elevated capital expenditure and questions about monetising the company's AI and Starlink Mobile initiatives continue to weigh on the shares.

However, he said the firm had become more optimistic about SpaceX's competitive positioning following the second-quarter results.

Bank of America maintained its Buy rating and $235 price target.

Morgan Stanley reiterated its Overweight rating and $300 price target.

The firm said its 2027 revenue forecast of $102 billion assumes little acceleration beyond the company's target of exceeding $100 billion in annual recurring revenue by the end of 2026 because it expects AI computing pricing to normalise.

The bank said stronger pricing than its base-case assumptions could add roughly $42 billion in AI revenue to its 2027 forecasts.

Deutsche Bank also maintained its Buy rating and $235 price target, saying the company's near-term growth outlook appears stronger than previously expected, driven primarily by AI.

The bank raised its forecasts while noting that capital expenditure is likely to increase further in 2027 as SpaceX seeks to add at least another 3 gigawatts of computing capacity.