SpaceX Q2 2026 earnings call
Questions on ElonsFAQ asked in this interview (3)
Transcript
0:00Good afternoon everyone. Thank you for joining us today for SpaceX's second quarter 2026 earnings conference call.
0:07I'm Andrea Williams, head of investor relations. Joining me today are Elon, Gwen, and Brett, and we are speaking to you from our facility in Bastrop, Texas.
0:16Our second quarter financial results were announced just after 3 p.m. Central time, and all relevant materials have been published to our investor relations website at ir.spaceex.com.
0:26For this webcast, our prepared remarks will be followed by a question and answer session. We will take live Q&A from equity analysts and then move to questions directly from our investors that were pulled on our dedicated earnings Q&A platform. Thank you to everyone who submitted your questions in
0:42advance. During this webcast, we will discuss our business outlook and make forward-looking statements. These statements are based on our predictions and expectations as of today. actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned
0:57in our most recent filings with the SEC, including our final perspectus and today's published form 10Q.
1:04Additionally, during this call, we may discuss certain non-GAAP measures in our press release and our filings with the SEC. You can find additional disclosures, including all reconciliations with comparable gap measures. For the second quarter of 2026, we announced the following
1:20financial results as compared to the prior year quarter. Revenues of 7.8 billion, up 92% from $4.1 billion. A quarterly net loss of $541 million, an
1:35improvement of $467 million, an adjusted IBIDA of $3.5 billion, up 191% from 1.2 2 billion. Now I will hand the call over to Elon for his opening remarks.
1:51>> Thank you. So it's been another milestone year.
1:58>> Uh thank you. Uh so it's been another milestone year for SpaceX so far. Uh we're uh making great progress developing a fully and rapidly reusable reliable rocket with Starship. We're connecting millions more people globally
2:13across 170 markets with fast, reliable Starlink internet. We're building AI compute capacity at scale faster than anyone else we believe. And we're significantly improving our AI models.
2:26Um most notably with the release of Gro 4.5 last month. Uh and now I'll I'll dive into each of those topics separately.
2:35So with Starship, we completed two successful flights of Starship B3 in the past 90 days. Uh flight 13 demonstrated core capabilities necessary to achieve an orbital mission and return to Starbase for catch and and on flight 14
2:50will be our first flight to fly uh our version three Starlink satellites, our communication satellites to operational orbit. Um, we uh will try to actually catch the first and the second stage of
3:05Starlink V3 this year and we could possibly catch the ship as soon as the next flight.
3:12Um, [clears throat] it and it's it's difficult to actually um explain to most people just this the incredible significance of Starship. Um, and I think perhaps describing it in
3:27terms of challenge to orbit is a good way to appreciate the magnitude um of of the impact Starship will have on the future of civilization.
3:39So right now we deliver call it roughly 2500 tons a year to orbit via Falcon.
3:49And uh this is a this is a big number by normal standards. The rest of the world I think delivers around uh 300 tons. Uh so we deliver you know 80 to 90% of total earth mass to orbit per year with
4:05with Falcon. Now with with Starship um our aspirations and I think we will achieve these aspirations are to deliver uh well over a million tons to orbit per year and probably ultimately
4:22uh 10 million tons per year. So this is this is not like if you had a chart where you plotted things. Uh you would need a very very big table to put the chart on to see uh to even see any
4:38of our competitors on that chart. And to make that our next biggest competitor was one pixel high on the bar chart, you would still need a very big bar chart to rep represent uh the SpaceX Starship vehicle. Um
4:54and and it's worth noting that we we actually, you know, encourage our competitors to copy us. We do nothing to slow them down. We actually launch a we launch competing satellite constellations uh at uh this fair prices, the same price we charge
5:09everyone. So we we we do encourage our competitors to copy us, but it's quite difficult to copy something like Starship.
5:17But we we don't we you know use patents as uh you know sort of a landmine exercise to stop people from copying us.
5:26We actively encourage it. So uh anyways but when you think about it on that you go from 2500 tons a year to you know a million potentially 10 million tons per year. It's it's really a prof ridiculously profound difference.
5:43Um but that is uh that is our plan and I think we will achieve that plan. Uh regarding Starlink um it's also worth just noting that the Starlink V3 satellite uh is about an
5:58order of magnitude more capable than the Starink V2 satellite which is was already a very capable satellite and and we expect to launch about an order of magnitude more Starink V3 satellites. Uh
6:13so that that would mean a roughly two order of magnitude increase in the delivered bandwidth.
6:20Um even if our monetization per bit uh dropped by a factor of 10, that would still mean a 10x increase in the revenue of Starlink. So I think people are really underestimating uh Starlink here.
6:35Um so this is a this is a big deal. Well, it's it's kind of hard for people to wrap their minds around this, but um like it's not out of the question that at some point uh Starink will deliver a
6:50majority of the world's internet at least in countries where we're allowed to operate which is the vast majority of countries.
6:59Um so this is uh you know important to bear in mind and it's not in like the infinity future. it's uh you know less than 10 years um so um and and uh w with the advent of AI um
7:17and humanoid robotics and you know vehicle robotics and just a massive number of robots the appetite for bandwidth will be much greater than it has been in the past. If you think of a human consuming perhaps or producing perhaps about a few hundred bits per second of output and uh and actually the
7:36average human is outputting less than one bit per second over the course of of a day which is 86,400 seconds. Um now computers, you know, could easily do billions of bits per second continuously over over a
7:51uh 24-hour period. So this is uh why I I would expect the appetite for bandwidth to grow dramatically with uh the growth of AI and robotics.
8:02Um and really I think Starink is the only thing that can actually uh service that bandwidth.
8:08Uh regarding um AI uh we're making rapid progress on on Grock because Grock 4.5 was a huge improvement. Um, and we have Grock 4.6 coming out probably next week.
8:26Um, and then Grock 4.7 is about 3 or 4 weeks from today. Um, and we expect the cadence of uh AI development to improve dramatically. Um, and then with with Grock 5, which should be out before the
8:43end of this year, we will be incorporating the entire corpus of SpaceX data. Basically all the data that SpaceX has ever produced um which is a tremendous amount over the course of a quarter century will be incorporated into Grock training and we think this
8:59will make Grock by far the best engineer. Um so this is uh these are all like very very big things. Uh in addition of course we are providing compute to others and we are we are building and
9:14deploying compute uh I think faster but our rate of growth certainly is faster than any anyone else and our efficiency of compute deployment I think is also the highest. Um so we we expect to end this year with
9:29over two gaws of compute. Um and uh probably our cumulative compute online by the end of next year uh will be several times higher. Um so it it you
9:46know it may let's say be closer to 10 gawatts of compute than 5 gawatt of compute as a way to think about it. Um and going forward we've decided to build exclusively on Nvidia
10:01uh because we think the uh the Bar Rubin architecture is is the best architecture. We think it's the best AI computer and um and we greatly value our close uh cooperation and partnership on
10:16many levels uh with Nvidia. So we're uh we're exclusive to Nvidia.
10:25Um and this new capacity coming online will obviously further benefit the development of Grock uh as will our cursor acquisition uh which uh should close quite soon. I think we've through almost all of the regulatory hurdles. Um
10:44and then with respect to the Star Mind uh AI satellite which will be essentially an optimized uh Bar Rubin NVL72 uh computer. Uh this this is this is not
11:00some sort of uh far future distant thing. We we expect to start launching these next year.
11:08Um and the uh we we think the design of the uh NVL72 VR computer is um a a much better design than is typical
11:25than say h having a standard rack rack style design and and so we expect to actually deploy this on the ground as well as in orbit uh because we think it's it's going to be um a radical simplification of the
11:41normal uh NVL72 rack. Uh it will it will cost less, it will be more effective. Um and so if we're going to put it in space, why not put it on the ground?
11:54So I think that's going to be pretty cool. Um uh in conclusion, the SpaceX team is solving some of the hardest engineering problems in the history of humanity.
12:05And um and we're s I think the team is succeeding because I think we've got uh you know in a lot of ways the the smartest most dedicated team uh of of humans that uh has ever existed. I'm
12:21incredibly proud to work with such a team and uh and I'd like to thank the team for their incredible hard work and and also thank you to investors who have supported us along the way.
12:38Thanks, Elon. We had an exceptional second quarter and today I'll focus on the operational and commercial highlights as well as the initiatives we are prioritized going forward.
12:50Starting with our space business, we remain the leading launch provider globally with 78 total launches and 1,041 tons of mass to orbit delivered in the first half of this year. primarily allocated to our own inter internal
13:05Starlink missions, but with great customer missions as well. While our launch capabilities are key to supporting our connectivity business, we continue to have a very robust commercial manifest and a very robust and growing US government mission
13:20demand, which drives revenue for the segment. We're currently launching at our highest Falcon cadence and are on the precipice of operationalizing Starship.
13:30As Elon said, the first two flights of our V3 Starship vehicles put us in an excellent position to achieve our near-term goals of reaching orbit, catching and reusing the ships and boosters, and deploying our V3 Starlink broadband satellites.
13:46Speaking of which, Starlink had a standout quarter driven by continued growth across our consumer, enterprise, and government businesses. During the second quarter, we added net more than 1.7 million Starlink subscribers
14:01globally consumer. This reflects our best quarter of new customers to date, an increase from the 1.4 million we added during the first quarter. We achieved this by holding ARPO, which is the average average revenue per user,
14:16stable at $66 per month compared to the first quarter. We ended the second quarter with service availability in 167 markets and have continued to activate new markets since then with some very exciting announcements coming soon, maybe even as early as today.
14:33As of June 30th, our constellation of operational Starlink broadband and mobile satellites in orbit grew to roughly 10,200 with our 9600 broadband satellites delivering roughly 800 terabits per second of total downlink capacity
14:50following a successful speedrun test of the V3 V3 Starlink satellites on the most recent Starship launch during which we connected every satellite through every laser link. We we intend to deploy V3 satellites into the constellation for
15:06operational use on the upcoming Starship missions. The significant amount of capacity we're able to add to the Starlink constellation from the V3 satellites will enable us to continue providing even better service, I think it's pretty great already, but to do so
15:22while serving more and more customers over the world. In fact, in the years ahead, we expect Starlink will represent a significant portion of global internet traffic, which Elon also talked about.
15:32We also see significant growth opportunities for Starlink in enterprise and government on the enterprise and government side of the business. We believe revenue from these markets have the potential to reach a scale at least comparable but likely exceed our consumer business as we continue to gain
15:47share. In the second quarter, we signed a major agreement with American Airlines as well as activated our service with new partners including Southwest Virgin Atlantic, Iberia, and Heirlingus. We have become the provider of choice among major airlines with outstanding customer
16:03feedback, but still have significant room for growth. In fact, we heard from one of our airline customers, shockingly, customers are flying uh shorter hop flights instead of uh instead of direct so that they could
16:20ensure that they're on a Starlink activated flight. They'd never seen this in the business before.
16:27On the government side, we won more than $6 billion in US contracts in Q2, supporting major Space Force programs that offer our nation mission critical communications and sensing capabilities.
16:38And we see even more room for growth in this sector in this coming year. In Q2, we also launched the new Starlink mobile partnerships with international carriers including SoftBank, NT, Dokamo, and Spark New Zealand. Our near-term
16:54priority is launching mobile V2 satellites on Starship ahead of integrating the 65 megahertz of Echoar Spectrum later next year. This spectrum transfer was recently approved by the FCC and represents a foundational competitive advantage for Starlink
17:10Mobile. In AI, the industry is hurdling towards ever more compute demands. We're rapidly expanding our compute capacity to meet our own needs as Grock expands as well as those for other leading companies such as Google and Anthropic.
17:25In terms of our own Grock models, the enterprise feedback on rollout of Grock 4.5 has been very positive so far. Token consumption tripled out of the gate after the July release, and we continue to see strong signals on usage and monetization for the model. We're
17:41looking forward to welcoming the Cursor team to SpaceX to integrate our engineering and begin to benefit from a combined sales capability.
17:49In review, our momentum as a business is extraordinary. Our engineering teams are scaling Starship and our NextG satellites, while our sales teams expand Starlink, aviation, mobility, and global markets. At the same time, we're bringing on additional compute capacity and expanding and deepening our AI
18:06partnerships across a broad broader set of customers. And though I've been in this business for 24 years, I could not be more excited about the months ahead.
18:15With all the exciting and amazing things going on, it really feels like we're just getting started all over again.
18:25>> Now, I'll turn the call over to Brett. >> Thank you, Gwen. We demonstrated strong results in Q2. Revenue growth accelerated across every segment. We narrowed our net losses by nearly half.
18:38and on a year-over-year basis on a year-over-year basis and we grew adjusted IBIDA meaningfully faster than revenue. Importantly, we significantly strengthened the balance sheet through our IPO and inaugural investment grade bond offering. The combination of our
18:54global launch leadership, recurring Starlink revenue, and rapid growth in AI infrastructure continues to drive improved operating leverage. Now, I'll walk through the financials for each segment. For the space segment, revenue
19:09grew 55% sequentially and 29% year-over-year to 962 million, driven by a higher number of larger customer launches and a favorable customer mix.
19:23Segment costs and expenses rose 389 million year-over-year, and we continued to accelerate R&D investments in our Starship program.
19:32Starship aims to quadruple payload capacity and reduce launch costs by 10 times compared to our Falcon 9 rocket, unlocking significant capabilities across all of our business segments. We continue to make progress building the
19:47infrastructure required to support thousands of Starship launches per year, including accelerating Raptor and launch vehicle production, the buildout of our gigabays, and making significant progress towards activating multiple
20:02launch pads at Starbase and in Cape Canaveral at pad 39A and pad 37.
20:09Space adjusted IBIDA was a loss of 205 million for the quarter primarily reflecting these higher R&D expenses.
20:18Moving to the connectivity segment, revenue was up in the connectivity segment by uh or was up to 4.3 billion, up 32% sequentially and 66% year-over-year. Growth was driven by record net additions of Starlink
20:34subscribers and a sharp increase in enterprise and government revenue. Starlink subscriber ARPO was $66 unchanged compared to Q1. As we continue our global expansion, we're taking a localized go-to market approach that
20:50ensures our product and service offerings fit local needs. While our geographic expansion may drive down blended ARPO over time, we anticipate continued subscriber momentum to deliver strong revenue growth.
21:05Enterprise and government revenue grew 108% year-over-year and represents a durable source of revenue contributing to strong segment margins overall. As Gwyn mentioned, we see enormous opportunity for growth in this segment as we remain for example less than 10%
21:22penetrated in one of the largest segments being aviation.
21:28Total costs and expenses for the connectivity segment increased 970 million or approximately 58% year-over-year. The increase was driven by higher spend to support our revenue growth, including growth in our satellite constellation, increased R&D
21:45investment for our nextg version 3 satellites and incremental marketing spend. As Elon mentioned, our version 3 satellites are expected to deliver 10 times the amount of broadband capacity and data density from our current generations, which I think we believe
22:01are already pretty amazing and which are essential to supporting continued subscriber growth and higher value service tiers.
22:10Income from operations from the connectivity segment increased 79% year-over-year to $ 1.7 billion, outpacing revenue growth and driving nearly three points of operating margin expansion.
22:23Connectivity segment adjusted IBIDA rose 64% year-over-year to $2.6 billion.
22:31AI segment revenue was 2.6 6 billion up 213% sequentially and 247% year-over-year. The increase was driven primarily by new cloud services agreements as well as growth in Grock
22:46and X subscription revenue. Advertising revenue grew 7% sequentially as we overhauled our advertising platform technology to enable AI functionality and enhance self-service for all customer types.
23:02In Q2, we entered into cloud services agreements providing access to compute capacity at our Colossus and Colossus 2 sites. The initial ramp from these agreements contributed $1.6 billion of incremental AI infrastructure revenue in
23:18the quarter. Total cost and expenses for the AI segment rose $1.6 6 billion year-over-year reflecting increased R&D primarily due to higher infrastructure spend as we accelerated compute deployment.
23:33We meaningfully narrowed our AI segment net operating loss to 1.3 billion and turned uh adjusted IBIDA positive for the segment in the second quarter at $1.1 billion.
23:46The incremental revenue from new hosting deals generated high incremental IBIDA margins as we monetized available compute capacity. We ended the second quarter with 1.4 gawatts of name plate compute up from 1 gawatt in Q1 and and
24:02400 megawws a year earlier. We expect to end this this year at over 2 gawatts of compute capacity.
24:11Total company capital expenditures in the second quarter were approximately 18.4 billion of which roughly 15.8 billion supported AI compute infrastructure. The remainder funded ongoing Starship and launch infrastructure, satellite production,
24:28and global ground station expansion. Additionally, we paid out 856 million during the quarter under our spectrum credit agreement related to our pending Echoar transaction.
24:40Our capital allocation priorities remain clear and disciplined. We plan to continue to invest aggressively in the three areas we believe generate the highest long-term returns. Starship development and production scale, next generation Starlink broadband and mobile
24:57constellations, and AI compute infrastructure. Across all three of these investments, we remain focused on capital efficiency, return on investment, and preservation of a strong investment grade balance sheet.
25:12The second quarter was transformative from a capital markets perspective. We completed our initial public offering raising approximately $85.7 billion in net proceeds and followed that with a $25 billion inaugural investment grade
25:27senior notes offering that was partially used to repay our 20 billion bridge loan. The senior notes were issued across five tranches with a weighted average interest rate of 5.855% and average maturity of 11.7 years. We
25:42ended the quarter with a 100red billion of cash cash equivalents and marketable securities and 47.5 billion in backlog.
25:51Looking ahead, we continue to see robust demand in all three of our business segments, but in particular in our cloud services arrangements. We see increasingly favorable economics with each agreement we sign. And as Elon
26:06mentioned, we expect the supply demand imbalance in the compute market to continue. The current economics have translated into a less than one-year payback on our new capital deployments for compute. For example, in the first few weeks of the third quarter, we've
26:21already contracted an additional $6.7 billion of cloud services revenue over a six-month period that begins ramping starting in October of this year. We believe this puts us on a trajectory including contri contribution from
26:36cursor to reach a h 100red billion of ARR or annualized revenue run rate by the end of this year based on our expected revenue in the month of December of this year. With that, I'll turn the call back to Andrea.
26:53>> Thank you, Elon, Gwen, and Brett. This concludes our prepared remarks for today's Q&A session. We will take our first questions from the equity analysts. Please press star one to join the question queue and also please limit yourself to one question. Operator,
27:09please proceed with the queue. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask
27:24that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device.
27:33Please stand by while we compile the Q&A roster.
27:41Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead.
27:48>> Thanks so much for taking the question and thanks for all the details in the um prepared remarks. Maybe just one on the connectivity segment. Can you discuss the backlog of enterprise and government contracts in that segment of the business and how we think about that backlog converting it to revenue and
28:03what that might mean for the pace and cadence of growth in the next couple years? Thanks so much.
28:11>> Um yeah, we are quite bullish on our enterprise uh activities. Um I mentioned a loan that uh we received from the government uh over $6 billion in um contracts. Those are kind those are you
28:26can look at those as tanches um and beginnings of additional capability that we will bring online. Um some of which we will have to compete. Um but fundamentally we have the contracts in place to fulfill uh many phenomenologies
28:42both the the um ones we've recently announced um as well as additional ones that we'll be working uh on going forward. Uh enterprise revenue is quite sticky. We have never lost an enterprise customer. They're quite happy with uh the Starlink capability that we have
28:58right now. Brett mentioned we are only 10% penetrated in the aviation industry.
29:04um which uh definitely represents a lot of headroom for revenue going forward. Maritime I think uh is uh Starlink opens up the TAM dramatically. Um Starlink offers the capability that other that
29:19ships that don't really have much connectivity right now because they can't afford VSATs. Um we can basically outfit those ships with uh Starlink Maritime. So I'm quite bullish on enterprise, very bullish on government um and uh quite happy with the
29:35stickiness that we've seen in those uh in those markets. >> Yeah, I I'll just elaborate a little bit on that which is that um obviously in order to uh secure a large amount of enterprise revenue, you have to demonstrate and and very high
29:51reliability, very high uptime. Um and in the early days, Stalink did not have high uptime. Um, and there's a lot of enterprise customers, most enterprise customers I'd say that do that still have that uh maybe early stalling experience where it was a little patchy.
30:05Um, so we we actually we're building up a a large enterprise sales team just to go out there, meet with uh uh enterprise, you know, basically corporate and government customers. Uh, show them the uh incredible uptime and
30:20low latency of the Starlink system um today. Um so they they they realize that they they can actually treat Starlink as a primary provider, not sort of a as a backup provider. Um but this this requires just going out there talking to
30:36people, educating them about the uh you know the the currency of the stalling system and where it's going. Um and uh I would expect enterprise revenue to to substantially exceed consumer revenue.
30:52>> Next question. Operator, >> your next question comes from the line of Adam Jonas with Morgan Stanley. Your line is open. Please go ahead.
31:01>> Uh, thanks Elon. First one for you. Just confirming [clears throat] you said you expect to be closer to 10 gawatts of gameplay compute by end of 27, closer to 10 than five. Um, do you have line of sight uh how confident is your line of sight on permitting chips and turbines
31:18for that? And then I have a followup for Gwen. Thanks. Uh so we're actually uh aiming to far exceed that gigawatt number in terms of power online power cooling uh and uh
31:35electrical equipment. So our uh tenative target is to actually have 20 gawatts at the power and cooling uh level online by the end of next year. Now, I don't think we're going to achieve 20 20 gigawatts, but we want to have um a a series of
31:52projects that cumulatively come to 20 gigawatts by the end of next year. Some of them won't pan out exactly on time, but I would expect that we still probably have at the at the power plant level uh something close to 15 gawatts.
32:06Um so, assuming that, you know, maybe a a quarter of the of the of the projects take longer than expected. Uh so our our goal is to have uh far more power cooling and electrical equipment than we have GPUs. That that's like logical
32:21thing to do given the relative expense of GPUs versus balance of system. Um SpaceX as a company is incredibly good at hardware. Um in fact I'd say probably outside of China, SpaceX and Tesla are the two best companies on earth at
32:37hardware. Um yeah and and I think perhaps even even including China. So um so we're taking a small amount of the expertise that we use for rockets and satellites and applying that to scaling terrestrial
32:52data centers. Um and uh we're finding that even a small amount of what we've learned building rockets which are incredibly difficult applied to data centers uh h yields tremendous benefits.
33:04So um so yeah, we we we expect to have far in excess of u yeah the power and cooling that's needed. Um and then um our our understanding with Nvidia is
33:19that we we we will receive uh a a very significant percentage of their GPUs next year.
33:28>> Okay. Thanks Alan. Just uh Gwen, just a followup. Um, you were recently asked what is one of the more underappreciated parts of the SpaceX investment story and uh, you said robotics. Can you elaborate on why you believe that? How do robots
33:44fit into the SpaceX cam? Thanks, Gwen. >> Um, let me let me try to put something together for you. Um, I think what what I might have said is underappreciating the amount of connectivity that we will need going forward. Um, and I think
34:01robotics, uh, especially robotics tied to AI, like for autos and humanoid robots, will dramatically increase the demand for connectivity dramatically. Elon talked about that in his early in his remarks.
34:18>> I mean, you can think of our satellites as being robots. I mean, they're autonomous and they do not need servicing. So uh and then you know in the sort of what may seem the far future but will come faster than you think uh you know
34:33using robots on the moon uh to scale up um manufacturing on the moon which I know it sounds like super sci-fi right now but it's going to happen uh will uh enable us to to build the uh mass accelerator on the moon and if you have
34:48a mass accelerator on the moon and and you have solar and radiator production on the moon. Uh you can uh I know this sounds totally nuts, but you you can you can probably scale to um a thousand times the economy of Earth
35:06in terms of intelligence launch to space. Uh but probably, you know, maybe even a million times. Um so, you know, we are going to land a lot of tonnage on the moon. We're going to build the factories on the moon. The US will be helpful with that. Um, and then
35:22it's like, well, how much intelligence would you like, uh, as we, you know, grow towards being a a cottage two scale civilization?
35:32>> Did that get that for you, Adam? >> Maybe he's done.
35:40>> Your next question comes from the line of John Goden with Croup. Your line is open. Please go ahead.
35:48>> Hey, thanks for taking my question. Um, one one of the hallmarks of SpaceX to date is how efficiently the organization has used capital so far in its journey, but it's also no secret that the capital needs are significant um to support your vision from here. Obviously, the
36:04company's moving fast. So, I was hoping you could talk a bit more about the capex outlook across the segments, touch upon any areas where buying verse building might accelerate growth. the mobile strategy obviously comes to mind there and any related thoughts on
36:19capital needs for next steps in extreme vertical integration like terafab um anything that's needed to support future growth thanks >> yeah no I I appreciate the question I think we are very proud of how we have uh we have managed capital allocation
36:34over the years for sure uh and uh you know I think we are continuing down that path right if if you look at it um we have been very efficient uh to date and I think we'll continue to be. You know, if you look at the rest of this year, uh to answer specifically on
36:51capex, I think you should probably think that the the next two quarters are very similar to the current quarter from a capex level perspective. But I do think, you know, as you look longer term, I think capex really I think for our perspective is all capex is not the
37:06same, right? What we're seeing right now is a situation where we're able to deploy specifically on the AI compute side. We're able to deploy capital in such a way that we're getting less than a one-year payback. It's almost like your your capital is becoming almost uh
37:22you know a an item that you would put otherwise in COGS because it's moving so quickly as far as monetization and moving into revenue. That's different than I would say historically on the SpaceX level where you know we're building assets that are going to benefit us from launch sites for the
37:37next couple of decades and and so we certainly manage for you know optimizing ROI on our capital uh you know all the time from that perspective.
37:48>> Yeah I'll I'll add a little bit to that. Um, you know, as as as Brett mentioned, we are expecting to reach 100 billion uh plus ARR uh in December of this year.
38:00Um, and it's it's probably also worth mentioning that our internal projections for reaching a trillion uh dollars in revenue, not ARR, but revenue, um, have moved up from 2031 to 2030.
38:12So prior to the IPO uh you know the finan financial projections we had were reaching a trillion dollars in in revenue uh in 2031. We now expect that to be in in 2030. Um and uh there's a non-zero chance of that being in 2029.
38:31>> Your next question comes from the line of Ronald Epstein with Bank of America. Your line is open. Please go ahead.
38:38>> Yeah. Hey. Hey. Good evening uh everybody. Um could you walk through um what you learned on um Starship launch 13? You know what was better than expected? You know what what was worse and then you know how do we think about
38:53this in the journey to kind of rapid reusability you know the heat shields so on so forth.
39:00>> Uh sure. So the yeah actually flight 13 I was a little worried about that flight 13 you know cuz you think of Apollo 13 like things went wrong on that flight you know but um this this flight actually went incredibly well um the heat shield uh appears to be very
39:15robust. The ship is still floating uh in the ocean uh and we expect to recover the ship um and uh bring it back for analysis. So I would say things look look very good. Um and uh and that's why
39:32we uh assuming we receive regulator regulatory approval to do so will attempt to uh catch the ship with the tower on the next flight which is tenatively scheduled for the end of this month. Um we expect the cadence of flights to be uh increasing rapidly. Um
39:51and uh you probably a year from now uh we will be doing u at least one flight a day uh possibly more.
40:04>> Your next question comes from the line of Doug Anmouth with JP Morgan. Your line is open. Please go ahead.
40:12>> Thanks so much for taking the questions. Um Elon, can you elaborate on the key unlocks from leveraging your rockets and satellite expertise just in accelerating the pace of compute buildout? And then um totally appreciate the $6.7 billion
40:28in incremental compute deals. Um, can you talk more about just how you expect the uh supply demand environment to persist going forward and and whether you'll be able to keep this kind of premium pricing for these deals and
40:43sustainability? Thanks. >> Sure. Um, well, you know, as the saying goes, you know, they say like they would say like this ain't rocket science.
40:53Well, actually rocket science is literally our daily business. Um and uh you know rocket science is a idiomatic expression for extreme uh technological difficulty and and there's a reason for it because the the thing let me tell you what what rockets desperately want to do
41:10uh every flight they desperately want to blow themselves into tiny pieces. Um and uh but then the engineering struggle is to u convince the rocket not to blow itself into tiny pieces and actually deliver payload to orbit. Um but you'll note that you know some of our competitors do in fact blow their rockets up. Um this is not a reflection
41:27on their uh does not mean they're they're incapable. In fact, I think our competitors are very smart people. But despite being very smart, the rockets still blow up. Um so now if you apply a small amount of the uh engineering skill
41:42that goes into making gigantic rockets uh reach orbit on a regular basis uh reliably to terrestrial data centers.
41:53This is like frankly the Yankees, New York Yankees going in and playing a little league team. And it's it's it's kind of ridiculous frankly. Um this like the terrestrial data centers are a trivial problem compared to making
42:08gigantic reusable rockets and which are launched frequently. Um and the stalling satellites also are uh like alien level technology. Um there there's still nothing that compares to our Starlink V2
42:24satellites and our V3 satellites are really more than an order of magnitude better than our V2 satellites. So you take a small percentage of that engineering applied to terrestrial data centers and you get an amazing outcome.
42:37Um so that's what we're seeing. Um yeah. Um now from a monetization standpoint um the if you say like what's my best guess
42:52for monetization per watt um of say Reuben's uh my guess is uh would would be somewhere between $30 and $50.
43:04Um this is just a guess. I'm just you know take a guess as a guess. Um but but what we're obviously what we're seeing with AI is that the intelligence per what watt is increasing rapidly. Um so that means the usefulness per what is
43:21increasing rapidly. Um and I think anyone who's a close follower of the AI arena um you you you start seeing smaller and smaller models do more and more amazing things. Um there's an argument that um we may get to the point
43:39where even an H100 uh is able to deliver a useful AI that's comparable to um a human engineer.
43:50Um at if you based on current trends I think that's that's not an impossible outcome. So then it's like how useful would that be? I think the usefulness that would be is going to be extremely high. Um I mean if you think of like where was AI
44:0812 months ago? I mean this is 12 months ago would have been August last year. This is that would have been before the advent of claude 4.5 which I think is should be considered one of the the milestones and a credit to entropic of you know was it was I would say a shock to the system uh was how good 4.5 was um
44:29and uh and that [sighs] was you know 10 months ago basically um and and if you say what about an AI two years ago I think well an AI two years ago feels like something that should be in a museum okay where you're like, you're not going to believe this, but two years ago, this was AI um this relic.
44:48Um so I I think, you know, by the end of next year, it's not clear to me that that there's anything that I that digital at least that AI won't be able to do
45:04um based on the current rate of improvement. Um then look at the rate at which uh logic and memory is being produced.
45:15Um and one must always consider the limiting factor here. Limiting factor currently is memory. The memory memory output is increasing um by around 20% per year. Now, normally that would be uh fantastically
45:32fast uh and and and amazing uh for any large mature industry. But but ask yourself, is the demand increasing by 20% a year? No, the demand is increasing by 200% a year, maybe higher.
45:46So um so if you've got demand increasing much faster than supply then economics 101 would suggest that the the price increases.
45:58It does not decrease.
46:04>> Your next question comes from the line of Edison U with Deutsche Bank. Your line is open. Please go ahead.
46:11>> Hi good evening. Thank you for for taking our question. wanted to to come back on the the comment about the 100 billion in AR. Is there any way you can can unpack that a little bit and and perhaps kind of what it takes to to get
46:26there? And then in relation to that, Elon, I know you mentioned you you pulled the the revenue target forward by year. Can you maybe call out maybe a few things that that gave you this this extra confidence? Thank you.
46:42Well, on the unpacking, I think that the key there is uh it's really growth in all three of the business segments, but the biggest piece is and we already talked about uh you know, additional business. we've already closed in the the first couple of weeks of of July on
46:57the uh the AI uh cloud services side, but certainly um as you know, we we've already announced some previous deals with Google and Anthropic that start to ramp um either later this quarter or uh you know in October. And so there's a
47:12lot of momentum from that side of the business as well as we're seeing uh you know strength in our own models and um and cursor uh coming into the fold as well. So it's really all all all all three segments that are that are driving that but the uh the cloud services piece
47:28being the largest contributor of that piece. >> Uh yes like to be clear the the 100red billion AR in December is not a question mark. That's that's what we would achieve if we basically did nothing. So um like you know so it I think it may be
47:45higher than that. It probably will be higher than that. Um the uh you know I I think in terms of the rel relative percentage of you know breakdown of like what revenue generates
48:01what um I think the the breakdown's probably similar to what we we shared preIPO. Um it's just happening a year a year sooner. Um, and um, you know, I will go back to what I said and and what
48:17Gwen and Brett mentioned earlier, which is that we we do expect a very rapid increase in uh, revenue from Starlink communications from the V3 satellite. um because like like I said, it's more than
48:3310 times the capability of the V2 satellite and we'll be launching 10 times as many and and we have the direct to cell constellation going up as well.
48:43So um you know so so some some of you were looking at the sort of historical growth of Starlink based on V2 but but we have a step change a massive step change
48:58happening with the V3 satellite.
49:04>> Your next question comes from the line of John Hodelik with UBS. Your line is open. Please go ahead.
49:12>> Great. Thank you. Uh, two things. Uh, firstly, Elon, just following up on on that comment on on Starlink Mobile. Uh, when do you expect to start launching the the V2s? Um, can you talk about your appetite for additional spectrum after the Equar deal? And then, um, just just how big do you think that the
49:28opportunity is is in mobile and and if you could compare that to the to the broadband business, that would be great. And then secondly, just a quick follow up on the comput. Looks like you're gonna you have a big ramp in compute coming in 2027. Um, how should we think of, you know, that capacity being leased
49:44versus used for for, you know, to train Grock? I guess in other words, you know, how much of that has to be withheld to to train Grock versus that can be leased out to to third parties? Thanks.
49:55>> I'll go ahead and take the Starlink mobile questions, John. Um, we're going to start flying the next generation Starlink mobile satellite. It's confusing. It's actually the second version um as opposed to the V3 which is
50:10the broadband next generation broadband satellite. We're going to start flying those uh next year. Um and just so you understand currently the system that we're operating uses about five megahertz of bandwidth. Um and we we we
50:27operate that through local telco providers. We we have 65 megahertz of bandwidth available to us through the Echoar uh spectrum uh which gives massive increase in capability. Another
50:42way to look at it is we will also probably 10x the number of satellites. So we simplifying you could look at the the the Starlink mobile leveraging this um the next generation satellite and the echoar spectrum as being a hundred times
50:57better 10 x 10 better than what we've got right now and it's a pretty decent service. You can do voice and video calls over um signal and WhatsApp. Um so we anticipate really strong uptake of that capability. As far as revenue, like
51:14I'm just going to take a very high level kind of top down. Um the big three in the United States, AT&T, Verizon, and Teemo, roughly between them, $600 billion dollars a year. Um and I
51:29anticipate us to be able to acquire quite a few of their customers because I think our service will be better. Um we will eliminate dead zones leveraging the um uh the the basically the satellites in orbit. It'll be better during any
51:44sort of natural disaster because surprisingly even though space movies make space look super dangerous is a pretty quscent environment. Um and uh so I'm quite excited about Starlink Mobile going forward. We will start to fly the
51:59satellites next year. Um and we will start providing service end of next year.
52:05Um yeah to ask you next >> I guess I should elaborate on we obviously have like more than one question being asked here but um the you know obviously if somebody's trying to create a financial model some of these questions are you have to plug them in plug in some number here u so for for
52:20grock training we we do expect uh the the percentage of compute that we use internally for grock training to to decrease over time and to have far more of the compute used for inference uh or to you know for for renting uh training
52:35and inference compute to others. Um so I would expect maybe you know 10% of our compute to be used for grock training something like that.
52:49>> Your next question comes from the line of catgun Marl with Evercore ISI. Your line is open. Please go ahead.
52:58>> Good afternoon and thanks for taking the question. I had a followup on Starlink Mobile and your ambitions in the US market in particular. I think a lot of us are trying to better understand what a US [clears throat] direct to consumer service could look like. You know, to become a true fourth US carrier would
53:14imply well over a 100 billion of mobile capex over time, much of it auction spectrum and green field infrastructure.
53:22So, how are you weighing that potential build plan against an MVO or acquisition path? And what's your internal base case on how far you'll take this ambition or is this all a little bit too premature at this point? Thank you.
53:38>> Uh the spectrum that we purchased from Echoar does have terrestrial components. So we definitely intend to build out terrestrial um the terrestrial component. So you will have not only the um the capacity from the satellites
53:53themselves, but you will have um a buildout of the terrestrial um basically the hardware and systems necessary to make a true mobile service exactly what you want it to be. Um I'm
54:08I'm not going to talk about the capex for that. Um it's a little well I don't want to say it's immature. I'm just going to say I'm not going to talk about the capex for that right now. Um but but let's talk a little let me give a little hint and that is you could put a base station um uh a cellular base station on
54:27uh the basically the gear that holds a Starlink broadband dish. So you can have kind of these little phento cells uh around the country and you deploy that as you need it. you don't have to um necessarily spend, you know, ten or many
54:43billions of dollars in low band spectrum all upfront before you deploy your system. Um so, uh that's why I don't want to talk about the capex for building out the terrestrial because we have a lot of really kind of great and new ideas for how we're going to do that and I think it will be quite capex
54:59efficient. Yeah, that that point is probably worth uh just a few more words which is that um because this is quite an important point uh you know instead of having to uh deploy these these very expensive and
55:16difficult to locate uh large uh cellular base stations uh we we we feel reasonably confident that uh we can deploy a large number of sort of small small stations essentially that They're really just Starlink dishes that also
55:32provide connectivity in the mobile spectrum bands um and have them be all over the place. Um and and the the Starlink antennas are located in uh you know on on the roofs of of houses and businesses. So they're you know it's
55:48that they've got a a sort of a clear view uh to you know for for providing connectivity directly to the cell to cell phones on the ground. um and and in fact providing connectivity that is we think probably better and higher bandwidth than uh what is currently
56:03available from cellular providers. This this is a this is an important point.
56:12>> Thank you. With the remaining time we would like to cover some of the questions from individual shareholders. I will read them aloud.
56:19We got a lot of questions on the progress for Starship human landing system. Can we provide any updates?
56:29for Starship. Well, well, obviously we need to make Starship uh super reliable for satellites uh before we put any people on board. But but we we are expecting to have a very high launch rate and thus achieve um a level of
56:44safety needed for humans very quickly uh probably by the end of next year.
56:53As far as the milestones go, um propellant transfer in orbit is critical to our uh both the our internal SpaceX as well as our hls uh ambitions. Artemis 3 mission is next year. That's where we
57:08will dock with um with the Orion spacecraft. Uh we will follow that up with a direct to lunar cargo mission uncrrewed. And then um we want to put boots on the ground, boots on the moon
57:23in 2028.
57:29For the cursor acquisition, there were several questions asking about the combined product roadmap for the companies once it closes.
57:41Um, [clears throat] I think we'll leave that to um we'll probably make some announcement or discussion of that outside of the ownings call. Um, but we don't want to jump the gun on regulators for uh the uh
57:56closing the acquisition. So, we're trying to get the acquisition closed as quickly as possible. I think we're we're pretty close to that, but but we have to be wary of sort of jumping the gun on regulatory closures.
58:09Next question from the individual shareholders. Once you start launching broadband V3 satellites, how quickly will they translate into improved Starling service?
58:19>> Well, it so we'd need a uh some critical mass of uh B3 satellites probably at least on on the order of about a thousand. Um but um probably that's
58:34you know I mean approximately second quarter next year uh would be I think where do we get get to that point?
58:46>> And our last question is the heat shield the hardest remaining problem for starship.
58:53Um, look, I don't I don't want to jinx it or anything, but I I think I think we I think I'd consider the heat shield problem solved at this point.
59:04Um, now we want to take a close look at the uh ship that uh is currently floating in the ocean. Um but but all uh all indications from data and and a visual inspection
59:20um suggest that the that that we have we have solved the the heat shield problem.
59:26Um which is uh arguably the single biggest problem. Um that doesn't mean we won't make improvements to the heat shield. Of course, we'll make we'll continue to make improvements to the heat shield, but I would say that um we we do not see any technical obstacles at
59:41this point to achieving uh full and rapid reusability.
59:48>> Thank you. This concludes today's call. You can reach us at ir.spaceex.com and we will see you next quarter.
59:54Cheers.