SpaceX SPCX shares have surged as much as 12% in Wednesday's trading session after Elon Musk's aerospace and artificial intelligence company delivered blowout Q3 results Tuesday evening, driven by soaring demand for AI infrastructure and continued growth in its Starlink satellite business.
Adding to investor enthusiasm, Musk discussed a potential merger with Tesla TSLA) while outlining extraordinarily ambitious revenue projections that could help SpaceX justify its premium valuation and a rally that has seen SPCX surge 40% in the last three months.
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SpaceX's Q3 Earnings Crush Expectations
SpaceX reported Q3 earnings of $0.35 per share, crushing the Zacks Consensus Estimate of $0.10 by 250%. Revenue soared 161% year over year to $14.57 billion, easily surpassing expectations of $12.53 billion by more than 16%.
Notably, SpaceX generated $4.4 billion in net income, reversing a $1.1 billion loss in the prior-year quarter.
Growth was particularly impressive in the company's Super Intelligence (SI) segment, where revenue reached $7.56 billion, supported by accelerating demand for AI computing infrastructure.
Additionally , SpaceX's Connectivity division, which includes Starlink, its satellite-internet network , generated $5.25 billion in revenue as consumer subscribers climbed to 13.6 million.
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Lofty Revenue Projections & Potential Tesla Merger
Perhaps most encouraging, SpaceX reiterated its goal of reaching $100 billion in annual recurring revenue (ARR) by the end of 2026, with Musk projecting an extraordinary $500 billion to $1 trillion in ARR by the end of 2027.
Furthermore, SpaceX issued bullish Q1 2027 revenue guidance of $33 billion to $37 billion, far exceeding Wall Street expectations of roughly $22 billion. These ambitious projections reflect growing confidence in the company's ability to monetize AI infrastructure investments.
Much of this projected growth is expected to come from expanding AI cloud infrastructure agreements with enterprise customers, along with increasing adoption of SpaceX's Grok AI applications and the recently acquired Cursor coding platform.
Meanwhile, Starlink provides another recurring revenue stream through its 13.6 million consumer subscribers and growing enterprise and government partnerships, including customers such as United Airlines UAL), Carnival Corporation CCL), Maersk AMKBY), and Deere and Company DE).
Investor enthusiasm was further bolstered by Musk's acknowledgment that SpaceX and Tesla have established special committees to explore a potential merger. Although a deal remains uncertain, combining the two companies could create unprecedented synergies across AI, robotics, satellite communications, and autonomous technologies.
SpaceX has already demonstrated its technological synergies with Tesla, helping the EV leader develop the rocket-inspired thrusters featured in Tesla's recently unveiled Roadster, which showcased the car's ability to briefly fly and perform midair stunts.
SPCX Technical Analysis & Zacks Price Target
Although SPCX is still more than 25% from its all-time high of $225 a share, the recent move above its 50-day simple moving average of roughly $147 a share suggests improving technical momentum and the potential for a continued breakout.
More intriguingly, the Average Zacks Price Target for SPCX is currently at $227 a share based on short-term price targets offered by 36 analysts.
It’s also noteworthy that SpaceX currently has a favorable average brokerage recommendation (ABR) of 1.78 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the recommendations given by 41 brokerage firms.
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Bottom Line: Should Investors Buy SPCX Stock?
Despite its lofty valuation and aggressive capital spending, SpaceX's remarkable growth trajectory is becoming increasingly difficult to ignore.
With revenue accelerating, profitability improving, and an expanding AI infrastructure business, the company appears increasingly capable of growing into its premium valuation.
SpaceX currently sports a Zacks Rank #2 (Buy), making SPCX an attractive growth stock to consider even after its post-earnings surge, although investors should remain mindful of the substantial execution risks surrounding its ambitious growth projections.
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This article originally published on Zacks Investment Research (zacks.com).