SI business accelerates outbreak and consolidates growth trend! UBS raises target for SpaceX (SPCX.US) to $230

According to news from Zhitong Caijing APP, after SpaceX (SPCX.US) released its Q3 financial report, UBS stated in a research report published on Wednesday that, driven by the strong performance of its artificial intelligence (AI) computing power leasing business, SpaceX's performance far exceeded the bank’s expectations and its growth rate has accelerated significantly.

SpaceX founder and CEO Elon Musk also addressed the topic of a potential merger between SpaceX and Tesla. He mentioned that a special committee has been established to evaluate the transaction, but he personally is recused from any relevant discussions, so he can only disclose limited information. He stated that there is substantial logic behind a merger, but it is by no means a foregone conclusion.

Management also provided some new guidance, including expected capital expenditures of $35 billion to $40 billion for Q4 (previous UBS expectations: $19 billion), higher than the $19.6 billion in Q3, as construction progress is accelerating. UBS estimates that to achieve its target of deploying 13 GW of computing power, the company will need to invest approximately $350 billion, a scale roughly comparable to other leading hyperscale cloud service providers (for comparison, Google around $380 billion, Microsoft around $230 billion, etc.).

UBS believes that SpaceX continues to meet the market’s high expectations for the company, and this trend is expected to persist—with new computing power deals gradually coming online in Q4, Starship making progress toward capturing vehicles and boosters, and continued upgrades of Grok’s performance and products. UBS believes the combination of these assets is unique, and as management delivers on the aforementioned targets one by one, they will continue to create long-term value. UBS rates SpaceX a “Buy” with a 12-month price target of $230 per share.

1. Super Intelligence (SI) Business: Accelerating Deployment Speed of Computing Power

SI business revenue reached $7.6 billion (in line with UBS expectations, above market consensus of $6.5 billion), up 195% quarter-on-quarter and 830% year-on-year. AI cloud business contribution continues to rise (the Anthropic deal has reached full run-rate and Google is starting to contribute initial revenue), and the acquisition of Cursor has been completed. This drove EBITDA to a high conversion of $5 billion (UBS: $4.5 billion; consensus: $4 billion), with a profit margin of 66%, higher than $1.1 billion and 45% last quarter.

Computing capacity increased by 300 MW to 1.7 GW (UBS estimate: 1.8 GW). Current power delivery is at about 200,000 GB300s per month (meaning an increment of approximately 1.2 GW each quarter), and management expects to maintain this delivery pace as the Rubin chip ships in 2027 (equating to an additional 1.9 GW per quarter). Current cloud computing pricing is slightly above last quarter’s stated range of $30-50 per watt, and the company will continue to capitalize on short-term deals to benefit from rising GPU prices. By Q2 2027, SpaceX plans to deploy a cluster of 440,000 Rubin chips (about 1.4 GW) to achieve optimal training results and further progress with Grok.

On the earnings call, Musk said he was “constantly being pressed by every hyperscaler” to provide more computing power rental services, and that demand is so strong that even if they sold several times their current computing capacity, it would quickly sell out. He anticipates spot rental prices will continue to rise and that the potential payback period for investment could be shortened to around six months by next year.

On this basis, the company has now raised its target for computing capacity by the end of 2027 to 13 GW, approximately 10 GW more than the previous expectation of 2.5–3.0 GW. Musk said that based on current visibility into power generation capacity, computing power could even reach 20 GW in 2027. At this infrastructure scale, with an approximate 50:50 ratio of owned to leased computing power, this would support the company in achieving $100 billion in annual recurring revenue (ARR) by the end of this year, and possibly $500 billion to $1 trillion by the end of 2027.

Management also mentioned modular computing power rollout solutions, which accelerate deployment schedules by integrating power and cooling systems within factories.

2. Connectivity Business: Expected to Accelerate in Q4 and 2027

Connectivity business revenue reached $5.2 billion (UBS expectation and market consensus: $4.9 billion), up 70% year-on-year; EBITDA was $3.5 billion (UBS: $2.8 billion; consensus: $2.9 billion), up 82% year-on-year.

Consumer broadband revenue grew 57% year-on-year (UBS: 48%), and enterprise & government business (including Starlink Mobile) grew 91% year-on-year (UBS: 79%), versus 44% and 108% in the previous quarter. Net new Starlink users were 1.6 million (UBS: 2.3 million; Q2: 1.7 million), bringing the total consumer user base to 13.6 million. Meanwhile, average revenue per user (ARPU) fell 17% year-on-year to $69 (down 22% year-on-year last quarter).

Management expects user growth to accelerate in Q4 (UBS expects 2.4 million net new users), as the company is building up inventory of terminals for the holiday season and delivering device kits to retail channels.

Additionally, following the recent acquisition of 800 MHz spectrum, management reaffirmed their confidence in capturing share in the U.S. mobile communications market and plan to launch the first V2 mobile satellite in 2027. Though management did not detail how or when the newly acquired spectrum will be deployed, they confirmed the 800 MHz band will be used at macro cell sites. After the call, Musk posted on the X platform to stress the need to better articulate the company’s mobile business strategy and said that industry veterans in telecom do not understand the fundamental changes SpaceX brings to the sector.

3. Space Business: Starship Reaches Orbit, Investment Remains High

Space business revenue reached $1.77 billion (UBS: $1.26 billion; consensus: $1.41 billion), up 6% year-on-year (29% year-on-year last quarter), and is currently transitioning from Falcon 9 to Starship missions.

EBITDA was $357 million (UBS: $144 million; consensus: a loss of $46 million), down from $672 million in the same period last year, due to increased R&D expenses for Starship.

The 14th flight of Starship marked SpaceX's first revenue-generating orbital Starship mission, a critical technical milestone in the project’s evolution from R&D to commercial operations.

The 14th mission deployed 26 Starlink V3 satellites into the broadband constellation, with payload roughly half the potential V3 load of Starship, but the downlink capacity was still about 10 times that of a Falcon 9 mission.

Management expects Starship launches to reach once a week in the first half of 2027, and twice a week in the second half, amounting to up to 72 launches in 2027 (UBS: 30, consensus: 40).

The company is proceeding as planned to attempt the recovery of both Starship stages this year (with Flight 15 targeted for next month), plans to launch the second stage again in early 2027, and conduct an on-orbit refueling demonstration next year.

Falcon 9 completed 35 launches in Q3, lower than 38 in Q2 2026 and 44 in the same quarter last year, including 12 customer launches and 23 internal launches. The total payload mass to orbit was 476 tons, compared to 525 tons in the same period last year.

Customer missions included the National Aeronautics and Space Administration’s (NASA) Nancy Grace Roman Space Telescope launch mission, with six missions serving national security customers. This quarter, the company added three Dragon crew missions, with mission durations now extended to 2028; it also added 18 national security launches, three Starfall missions, and one Starship lunar payload delivery contract.