SpaceX’s Musk Lauds Its Soaring Cloud Business and Possible Tesla Merger

SpaceX put on a bit of a show for shareholders today—and I’m not referring to the sizzle reel of rocket and space videos it showed on its earnings call. No, the big attention grabber was the update from CEO Elon Musk on the progress of SpaceX’s contemplated merger with Tesla and just how involved—or not involved he is in the whole affair.

First though, it’s worth mentioning the other big highlight from the call: SpaceX’s booming AI—excuse me, SI—business, a category that includes the company’s X social media service, its Grok Bot agent platform and a cloud infrastructure service it has started to rent to outsiders like Anthropic. The segment is on fire. It saw its third-quarter revenue nearly triple to $7.56 billion, making it the largest business category at SpaceX. And if that wasn’t enough, the SI business swung to an operating profit of $431 million from a $1.26 billion loss in the second quarter.

SpaceX shares jumped nearly 7% in after-hours trading following the report.

SpaceX executives made it clear that the big story in its SI (superintelligence) segment is its cloud business. Musk told investors the company’s phone is ringing off the hook with demand from businesses that want to lease SpaceX’s AI compute. “We are hounded relentlessly by every hyperscaler and by dozens of smaller companies to rent more of our compute,” Musk said. “We could rent out our compute several times over if we said yes to everyone.”

For his part, Bret Johnsen, SpaceX’s chief financial officer, described that demand as “extraordinary” and said at the prices it’s currently charging its cloud customers, SpaceX is “generating a payback in less than a year” on new data centers after it deploys them.

Musk also addressed a question from an investor about his desire to unite SpaceX and Tesla. He said the respective companies have formed special committees to examine a merger, but because he’s CEO of both Tesla and SpaceX, he has needed to recuse himself from those discussions.

Still, that didn’t stop him from telling everyone listening to the call that he thinks a merger is a grand idea. “I do think there’s a lot of merit to combining both companies,” he said.

Musk also stated the obvious caveat: Any deal will still need shareholder approval, and there’s no guarantee they’ll bless it. “I think some people assume a SpaceX-Telsa merger is a certainty,” he said. “I think that would be overstating it.” Nonetheless, Musk’s shareholders tend to be very obedient to him. If the companies decide to move forward with a merger, stay tuned for Musk to start turning up his X megaphone and encouraging them to fall in line.

Netflix’s Sad Trombone

The other shoe just dropped at Netflix. Last than a week after announcing the layoffs of about 1,000 employees, or 6% of the company, Netflix reported its weakest quarterly revenue growth in three years—an 11.8% jump to $12.87 billion in revenue. For a figure lower than that, you have to go all the way back to the third quarter of 2023. It didn’t help that Netflix told investors revenue growth will get even worse in the fourth quarter, estimating 11.5% for that period. The company’s shares fell 5% in after-hours trading.

The weak third-quarter revenue number wasn’t exactly a surprise; it was slightly better than the growth rate Netflix had told analysts to expect last quarter. But it’s obvious from the heads that have rolled at Netflix over the past week that the company’s CEOs, Ted Sarandos and Greg Peters, aren’t happy with the state of its business. The firings included Bela Bajaria, chief content officer, and David Lin, film chief, a sign that the company wants to reset its approach to movies and series. It's still a powerhouse in living rooms: The new season of “The Diplomat” is back on with a vengeance on my TV set. But Netflix feels like it’s looking for a new act.

• In a draft IPO prospectus, Anthropic disclosed a net loss of more than $80 billion for the first half of the year, reflecting its accounting for financing agreements, The Wall Street Journal reported. Around a fifth of its $16.3 billion in revenue for the period came from two customers.
• Elon Musk ordered the slowdown in a military version of Starlink in Ukraine, The Wall Street Journal reported.
• Salesforce agreed to buy customer engagement platform Braze for roughly $5.66 billion, including debt.
• Joel Kaplan, Meta Platforms’ chief global affairs officer, plans to leave the company after more than 15 years.

Today on The Information’s TITV

Check out today’s episode of TITV in which Akash Pasricha speaks with analyst Dan Flax about the upcoming quarterly results for Meta Platforms, Alphabet, Microsoft and Amazon.