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Speaker 1: Bloomberg Audio Studios.

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Speaker 2: Podcasts.

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Speaker 3: Radio.

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Speaker 2: News. This is a breaking news update from Bloomberg.

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Speaker 4: Instant reaction and analysis from our 3,000 journalists and analysts

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Speaker 4: around the world.

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Speaker 3: We did see that third quarter revenue for SpaceX came

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Speaker 3: in at about $ 14. 58 billion, topping expectations of $ 12. 87 billion.

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Speaker 3: We're seeing a bit of a reaction in the stock.

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Speaker 3: Talk to us about what you're taking away from what

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Speaker 3: you're seeing thus far.

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Speaker 4: Yeah, I mean, well, the net income number is a

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Speaker 4: lot higher than we thought. And a lot of people

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Speaker 4: went into this print saying, okay, SpaceX has a very

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Speaker 4: high capital expenditure story.

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Speaker 2: Capital expenditures in the quarter came in at $ 19.

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Speaker 4: 6 billion. which was pretty much in line, 19.59 instead

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Speaker 4: of 19.6. And then you scroll down and you're like

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Speaker 4: net income, $ 4. 4 billion. The estimate was for 1.8. This

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Speaker 4: is their first quarter. Again, they only had two quarters

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Speaker 4: as a public company. They're reporting for the second time,

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Speaker 4: but they are reporting profit basically on an EPS basis,

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Speaker 4: 35 cents a share ahead of the estimates, 15 cents

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Speaker 4: a share. And a lot of people ask me a

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Speaker 4: really simple question. I'm not an accounting expert, by the way,

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Speaker 4: nor am I an analyst.

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Speaker 2: I'm a reporter.

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Speaker 4: But capital expenditures, a big bulk of that gets depreciated

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Speaker 4: over a longer time horizon. And that answers, it's purely accounting,

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Speaker 4: how you could have CapEx at that level and still

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Speaker 4: see them massively outperform on their income, with revenues also

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Speaker 4: outperforming on the top line against those different segments that

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Speaker 4: they have, AI connectivity and space.

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Speaker 5: What about Tesla, SpaceX, the merger, if, when? I guess

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Speaker 5: it's not if, right? It really is when at this point.

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Speaker 5: And I'm wondering, I don't see any headlines regarding that.

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Speaker 5: I'd have to imagine Elon Musk will be asked about

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Speaker 5: it during the call.

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Speaker 4: I mean, they have issued a press release so far, right?

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Speaker 4: And the press release has the numbers in it. What

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Speaker 4: SpaceX does, very similar to what Tesla does, is they

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Speaker 4: offer retail investors the chance to submit questions in advance

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Speaker 4: of the earnings call. And they dedicate a portion of

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Speaker 4: the earnings call to those retail investors. And how it

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Speaker 4: works is it's a forum, and then registered retail investors

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Speaker 4: get to upvote the questions they're most interested in. By

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Speaker 4: the time I ran to set to talk to you guys,

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Speaker 4: when will SpaceX merge with Tesla was question number two

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Speaker 4: by votes. That happened last quarter as well. But IR,

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Speaker 4: investor relations, did not put that question in front of management.

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Speaker 4: And sell-side analysts who participate in the call, as is traditional,

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Speaker 4: did not ask. Different to Tesla's last quarterly earnings call,

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Speaker 4: where a brave sell-side analyst just asked Elon outright. And

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Speaker 4: Elon Musk had some prepared remarks about it, saying that,

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Speaker 4: you know, that they, the companies work closer together, but

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Speaker 4: that wasn't the appropriate forum.

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Speaker 2: For them to discuss it.

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Speaker 4: So the answer in short is we don't know, but

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Speaker 4: I just wanted to lay out like the state of play,

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Speaker 4: which is the market thing is going to happen imminently.

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Speaker 4: And it's just whether or not it gets put in

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Speaker 4: front of management as a question today through those two mechanisms. Yeah.

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Speaker 3: And, you know, just kind of building off of that,

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Speaker 3: we know that SpaceX has become the main driver of

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Speaker 3: Elon Musk's wealth since his IPO and now makes up

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Speaker 3: about more than three quarters of his net worth, actually,

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Speaker 3: according to the Bloomberg Billionaires Index. So really helping make

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Speaker 3: him the world's first trillionaire. How do you think about

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Speaker 3: the focus, the split, really, when you're an investor, maybe

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Speaker 3: in SpaceX or Tesla? How do you think about the

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Speaker 3: split in Elon Musk's focus between these companies?

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Speaker 4: So far, it's not been a concern. You know, if

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Speaker 4: you look at the disclosures, risk disclosures in the annual

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Speaker 4: regulatory filings that both companies put out Elon Musk's centrality

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Speaker 4: to the future of both SpaceX and Tesla has been

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Speaker 4: sort of codified for quite some time. The question does

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Speaker 4: come up from time to time in sort of more

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Speaker 4: ad hoc settings. But then the other thing to remind

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Speaker 4: yourself of, and this was very evident in last quarter's

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Speaker 4: SpaceX earnings call, its first ever earnings call, is that

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Speaker 4: there are at least two but many more very competent

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Speaker 4: executives at SpaceX. Gwynne Shotwell, the president and COO. Brett Johnson,

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Speaker 4: the CFO. They are very hands-on, present. Gwynne Shotwell spent

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Speaker 4: a lot of the time speaking about SpaceX's ambitions in telecommunications, right?

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Speaker 4: Direct-to-cell connectivity, something that rocked the carriers. If you remember,

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Speaker 4: she said explicitly, we're going to try and take customers

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Speaker 4: from T-Mobile, Verizon, AT & T, and those stocks fell

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Speaker 4: as a result. That was during last quarter's call. And so,

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Speaker 4: you know, Elon Musk lets those operators do their thing.

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Speaker 4: And he is kind of seen as the sort of

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Speaker 4: brain that drives the bigger picture and the vision.

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Speaker 2: But, you know, SpaceX AI.

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Speaker 4: as part of SpaceX now, SpaceX SI, as it's now known,

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Speaker 4: is full of very talented people as well, like on

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Speaker 4: the AI engineering level. So I think that kind of

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Speaker 4: answers it, right?

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Speaker 3: And I'm happy that you brought that up because, you know,

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Speaker 3: just talking about the pressures that we did see on

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Speaker 3: the telecom stocks, Verizon, T-Mobile, AT & T, more broadly,

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Speaker 3: what is the expectation for SpaceX and its push into

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Speaker 3: just mobile services? Is this something that it's expected that

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Speaker 3: SpaceX should excel at, excel in rather?

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Speaker 4: Yeah. So the story started with satellite constellations that were

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Speaker 4: for internet, right?

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Speaker 2: Starlink.

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Speaker 4: Very simply, you had a ground receiver, a little dish

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Speaker 4: in your home or in your business or on your boat,

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Speaker 4: and it was really amazing, super fast internet. And that

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Speaker 4: was on the business side, the cash cow. And very quickly,

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Speaker 4: the story grew and evolved into ambitions around direct-to-sell. And

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Speaker 4: what has happened in the last quarter, the last 90

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Speaker 4: days since that last earnings call is SpaceX moved very

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Speaker 4: quickly and very aggressively to buy terrestrial assets and to

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Speaker 4: buy spectrum necessary for them to basically offer themselves as

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Speaker 4: a more complete carrier, offering not just constellation space based internet,

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Speaker 4: but direct to cell services as well, guaranteeing cell coverage,

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Speaker 4: whether you're out in the Rockies or in the wilderness

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Speaker 4: of California, where I like to go, or you're in

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Speaker 4: a blind spot in Manhattan. And so we're waiting for

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Speaker 4: the continuation of that story to kind of present itself

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Speaker 4: as a business model.

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Speaker 2: You know, what SpaceX Mobile looks like. And we're not

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Speaker 2: quite there yet.

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Speaker 4: And obviously, in the earnings statement, the press release, there's

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Speaker 4: nothing about that sort of codified.

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Speaker 5: I'm going to just step back from the earnings for

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Speaker 5: a moment and talk to you about another story regarding

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Speaker 5: SpaceX and Elon Musk that made news this week on X.

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Speaker 5: He said he wants to give a share of SpaceX

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Speaker 5: to every kid in America next year. He didn't really

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Speaker 5: say how he was going to do it. He suggested

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Speaker 5: maybe like through the Trump account program, but I know

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Speaker 5: that also comes with restrictions on when you can sell.

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Speaker 5: Have you heard anything at all? We also know that

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Speaker 5: Elon Musk doesn't always, you know, doesn't materialize everything the

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Speaker 5: man says, but yeah, what have you heard?

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Speaker 4: Well, so this played out on X as well, right?

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Speaker 4: So once we ran our story with the update, which

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Speaker 4: I'm about to give you, then the president of the

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Speaker 4: United States weighed in and said, thank you, this is

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Speaker 4: what Trump accounts was all about. And then there were

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Speaker 4: other people replying to Elon Musk about Trump accounts. But

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Speaker 4: based on a source and some reporting that we did

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Speaker 4: just before that, Elon was meeting with administration officials, others

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Speaker 4: involved in the Trump accounts program for about the last

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Speaker 4: 18 months, you know, in the run up to this

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Speaker 4: behind the scenes.

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Speaker 2: And the tipping point.

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Speaker 4: Was when they basically did 70 million auto account setups.

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Speaker 4: And once Musk had seen those 70 million accounts, many

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Speaker 4: of which were auto set up, as I say, he

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Speaker 4: was like, okay, this is the mechanism.

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Speaker 2: It's the only.

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Speaker 4: Mechanism in which you could distribute a share to those children.

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Speaker 4: And the math, by the way, like census data, I

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Speaker 4: think there are, between 72 and 73 million eligible children

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Speaker 4: in the United States anyway. So all that was was

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Speaker 4: the Trump Accounts Program basically providing an account for almost

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Speaker 4: every child in America by default. And that got the

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Speaker 4: world's richest person committed. That's my understanding of how that

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Speaker 4: played out.

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Speaker 3: Yeah, we want to bring George Ferguson into the conversation,

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Speaker 3: and he is Bloomberg Intelligence Global Head of Aerospace Defense

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Speaker 3: and Airline Analysis. So we want to talk to you

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Speaker 3: a bit about SpaceX. That's what we've been talking to

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Speaker 3: Ed a lot about. Right now we see shares that

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Speaker 3: are higher. Tell us kind of what you're taking away

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Speaker 3: from these numbers.

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Speaker 1: Yeah, so I think what stood out was a couple

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Speaker 1: of things. There was more profitability that flowed through both

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Speaker 1: the connectivity business and the AI business than we originally expected.

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Speaker 1: One of the things that sort of came out to

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Speaker 1: me was that it looks like there are some decent

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Speaker 1: economies of scale inside Starlink. So it looks like they

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Speaker 1: grew revenues pretty well. And we didn't see sort of that,

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Speaker 1: you know, a similar increase in the cost, which is

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Speaker 1: probably no surprise, right? Starlink should have a fair amount

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Speaker 1: of scalability to it. And maybe one of the reasons

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Speaker 1: why you saw them go in and buy more spectrum

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Speaker 1: so it could fix some of the challenges with Starlink

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Speaker 1: for being in buildings and such. So a push, I think,

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Speaker 1: to enhance the profitability of Starlink, probably because in the

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Speaker 1: near term, that's going to be important to the SpaceX story.

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Speaker 1: It's going to be important to generating cash flow, showing profitability.

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Speaker 1: But again, I think we saw both in Starlink and

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Speaker 1: in the AI business, we saw better profitability than we expected.

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Speaker 5: When you talk about catalysts for this stock, it continues

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Speaker 5: to be an unfolding story, George, but with SpaceX, we've

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Speaker 5: got Morgan Stanley analyst Adam Jonas saying that the Starship

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Speaker 5: rocket's next launch could be a catalyst for SpaceX's valuation.

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Speaker 5: What are your thoughts on that?

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Speaker 1: Look, I get calls after every Starship launch, right, asking me,

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Speaker 1: was it a good one? Was it a good one?

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Speaker 1: Was it a good one? Look, I think that SpaceX

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Speaker 1: has gone a long way with space launch. And everything

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Speaker 1: they do is very impressive. They talk about it here

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Speaker 1: as well in their 10Q. And the amount of satellite,

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Speaker 1: the size of the satellites they can get up, the

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Speaker 1: increased power of that satellite they can get up, it

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Speaker 1: improves the Starlink business tremendously. I think it's great, right?

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Speaker 1: But I think that we need to see sort of

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Speaker 1: Starship come more repetitively. I'd like to understand better whether

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Speaker 1: or not they had any problems with the heat shields

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Speaker 1: on the last launch so that we could understand what

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Speaker 1: kind of cadence they can get out of Starship. Again, look,

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Speaker 1: it's amazing what they're doing with launch, but they'll need

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Speaker 1: more of that to get data centers in space. They'll

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Speaker 1: need more launch faster turnarounds to get data centers in

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Speaker 1: space and keep building out the constellation. One quick thing

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Speaker 1: I'd mention before I go back for another question. I think,

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Speaker 1: you know, we saw, I think, 11.1 thousand, so 11,000

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Speaker 1: plus satellites in orbit. I think last time we saw

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Speaker 1: about 10-ish thousand. So they're building the constellation. Starlink looks

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Speaker 1: like it's building out. That's good stuff.

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Speaker 3: Yeah, I mean, I'm also just curious how you're thinking

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Speaker 3: about SpaceX right now. When you think about its launches,

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Speaker 3: you think about the Falcon 9 and how it's really

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Speaker 3: matching up against competitors right now.

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Speaker 1: So again, Starship is much larger than Falcon 9. And

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Speaker 1: to me, Starship is the more important story on launch

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Speaker 1: for this company. Falcon 9, great rocket. They're using it

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Speaker 1: for some NASA missions and such. The space business actually

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Speaker 1: lost a little bit of money Less money than we

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Speaker 1: expected to lose. It was very nominal. Less money than

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Speaker 1: we expected to lose. They're spending a lot of money

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Speaker 1: in R & D in the space launch business. Again,

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Speaker 1: to me, the future of this business is Starship and

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Speaker 1: not Falcon 9. Falcon 9, I think they got down

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Speaker 1: to a really nice science for usability, but Starship reuses

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Speaker 1: everything and has much more volume so they can replenish

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Speaker 1: the constellation and get data centers in space. To me,

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Speaker 1: that's more important to the story than Falcon 9.

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Speaker 5: So I want to bring Ed Ludlow, the host of

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Speaker 5: Bloomberg Tech, back into this conversation. To your mind, Ed,

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Speaker 5: what is the next big catalyst for SpaceX? We were

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Speaker 5: talking a minute ago with George about Starship and the

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Speaker 5: Starship launch being that catalyst.

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Speaker 4: Yeah, I've said on this program so many years now,

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Speaker 4: Elon Musk's great skill is with the investor base is

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Speaker 4: keeping them looking to the horizon, to the next thing.

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Speaker 4: You know, George explained very clearly that all of these

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Speaker 4: future business lines are predicated on the success of Starship.

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Speaker 4: You know, orbital data centers do not happen without Starship.

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Speaker 4: The scale of the Starlink constellation and future generations where

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Speaker 4: that constellation contributes to a direct-to-sale service, i.e. Starlink Mobile,

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Speaker 4: It doesn't happen without the capacity of Starship.

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Speaker 2: So that is.

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Speaker 4: Our ongoing track of progress Starship makes.

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Speaker 2: They're also on the hook for NASA, right?

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Speaker 4: But for me, it's just continued consistency and update of

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Speaker 4: when we get the first deployment. of a data center

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Speaker 4: in space. Because again, if you just go back two

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Speaker 4: quarters to the IPO, the prospectus could not have been more.

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Speaker 2: Clear that all of these future total addressable

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Speaker 4: Markets, 26.5 trillion of them, that they don't happen without

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Speaker 4: data centers in space and as a step before that

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Speaker 4: Starship being a rapidly reusable and economically viable launch system.