First financial report broadly beats expectations, AI computing power expansion drives forecast and target price upgrade

Overview

Space Exploration Technologies Corp. released its first quarterly results after listing, with strong momentum maintained across its three major businesses: space launch, satellite connectivity, and artificial intelligence. Second-quarter revenue and GAAP operating profit significantly exceeded Goldman Sachs and market expectations, with AI cloud service agreements and continued Starlink penetration as the main drivers. Goldman Sachs accordingly substantially raised its operating forecasts for 2026 through 2028, reiterated its Buy rating, and raised its 12-month target price to $220.

Core views

Goldman Sachs believes the company, through the cost and execution advantages created by vertical integration, can simultaneously participate in multiple potentially trillion-dollar markets, including space launch, satellite connectivity, and AI computing power. The long-term value of the space business depends on Starship reducing launch costs and increasing launch frequency; the connectivity business is expected to achieve above-industry growth through Starlink penetration in consumer, enterprise, and government markets, while providing a source of cash for other businesses; the AI business is the core driver of this forecast upgrade because the pace and cost performance of ground-based computing power buildout exceeded expectations. In the near term, the share price may still be affected by lock-up expirations, high capital expenditures, and key technologies that remain to be validated.

Analysis framework

The report compares quarterly actual results with Goldman Sachs' prior forecasts and consensus expectations, updates the segment operating model based on management's comments on launch cadence, Starlink demand, AI computing power buildout, and capital expenditures, and determines the target price using a sum-of-the-parts valuation method based on 2029 segment forecasts. Enterprise value for each segment is calculated using the corresponding valuation multiple, then discounted 1.5 years at a 12% discount rate, with net cash adjusted and divided by diluted shares.

Methodology notes

• Valuation methodSum-of-the-parts valuation (SOTP)

  Separately estimate the enterprise value of the space, connectivity, and artificial intelligence businesses, then aggregate and adjust for net cash and diluted shares.

  The space business uses an enterprise value multiple of 9.5x 2029 revenue, the connectivity business uses an enterprise value multiple of 24x 2029 GAAP operating profit, and the AI business uses an enterprise value multiple of 28x 2029 GAAP operating profit.

• Discounting methodCapital Asset Pricing Model (CAPM)

  Use the Capital Asset Pricing Model to determine the discount rate for forward segment values.

  The report uses a 12% discount rate to discount 2029 segment enterprise values by 1.5 years; parameters include a 3% risk-free rate, an average beta of about 1.3, and a 7% equity risk premium.

• Factor analysisGoldman Sachs factor profile

  Evaluate the stock's characteristics relative to the market and industry peers from the perspectives of growth, financial returns, valuation multiples, and composite indicators.

  The growth dimension references forward revenue, EBITDA, and EPS growth; the financial returns dimension references forward return on equity, return on capital, and cash return on capital; the valuation dimension references multiple forward valuation multiples.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SPCX.US

  The U.S.-listed stock directly covered by the report, rated Buy by Goldman Sachs.

  Strengths

  Leading position in space launch; vertical integration helps reduce costs and accelerate buildout; Starlink has a continuously growing consumer base as well as enterprise and government order opportunities; the pace and cost performance of AI ground-based computing power buildout exceeded expectations.

  Weaknesses

  High capital intensity and pressure on free cash flow, with some long-term value dependent on not-yet-fully-validated rapid reuse of Starship, orbital computing power, and large-scale AI infrastructure.

  Comparison

  The valuation multiple for the space business references a peer average enterprise value-to-revenue ratio of 9.5x; the company's comprehensive advantage lies in placing launch, satellite connectivity, and AI computing power within the same vertically integrated system.

  Risks

  Governance and related-party transactions, financing and dilution, regulatory approvals, fixed-price contract margins, connectivity and AI competition, supply chain and chip dependence, and macroeconomic risks.

Key data

• Magnitude of second-quarter earnings beatRevenue was about 17%/15% above Goldman Sachs/market forecasts; GAAP operating profit was about 92%/91% aboveThe beat was mainly driven by AI cloud service agreements and continued Starlink growth.
• 2026 revenue forecast$47.64bnThe prior forecast was $38.24bn.
• 2026 GAAP operating profit forecast$10.06bnThe prior forecast was $1.02bn.
• 2026 GAAP EPS forecast$1.00The prior forecast was -$0.09.
• 2026 third-quarter revenue forecast$14.60bnThe prior forecast was $11.99bn.
• 2026 third-quarter GAAP operating profit forecast$4.25bnThe prior forecast was $1.61bn.
• Starlink consumer usersAbout 12 millionAbove Goldman Sachs' forecast of 11.8 million, with significant room for penetration remaining in enterprise and government markets.
• Ground-based AI computing power planAbout 2.3GW at the end of 2026, rising to about 10GW over the next roughly two yearsPotential monetization paths include compute hosting and inference services, but supply chain as well as power and cooling capabilities still need to be validated.
• 12-month target price$220Raised from $205; potential upside relative to the report's listed price of $125.33 is 75.5%.
• Expected 2026 capital expenditures$64.59bnManagement expects quarterly spending levels in the second half of 2026 to be broadly similar to the second quarter, above Goldman Sachs' previous assumption.

Impact & implications

The earnings forecast upgrade and improved visibility for the AI business strengthen SPCX's long-term growth narrative across multiple large markets and also increase the credibility that high capital expenditures may generate higher returns. If Starship launch frequency, Starlink enterprise and government orders, and ground-based computing power expansion progress as planned, the current valuation may receive further support; however, cash burn, potential financing, and equity dilution mean operating growth may not fully translate into shareholder returns, and the near-term price discovery process may also remain highly volatile.

Risks

• The founder and CEO holds majority voting power, concentrating governance and major execution risks.
• Related-party transactions with founder-affiliated entities may create conflicts of interest and governance risks.
• High capital expenditures and ongoing cash burn may require large-scale debt or equity financing and cause equity dilution.
• Commercial launch competition, internal launch demand crowding out capacity for external customers, and reliance on government contracts may affect performance of the space business.
• Starship has not yet proven full reusability and high-frequency launch capabilities; technical or schedule delays would affect the space, Starlink, and orbital computing power plans simultaneously.
• Regulatory approvals or licenses related to launch, reentry, satellites, and spectrum may face delays or renewal difficulties.
• Starlink faces competition in broadband and mobile services, and there is uncertainty around expansion of enterprise and government contracts, channel partnerships, and average revenue per user.
• AI computing power expansion depends on power, cooling, supply chain, and third-party critical inputs such as NVDA GPUs, and the 2027 target still requires more execution evidence.
• Orbital data centers are an unproven technology, with scaling expected only after 2030, implying relatively high execution risk.
• The first lock-up expiration may increase tradable supply and lead to near-term share price volatility.
• A deterioration in the macroeconomic environment may pressure demand, financing conditions, and valuation levels.

What to watch

• Whether Starship's 14th test flight achieves key objectives such as first orbital insertion, Starlink V3 satellite deployment, or aerial capture.
• Whether the company can form five launch pads by the end of 2027, and whether launch frequency is raised over the next 12 to 18 months.
• Starlink consumer users, average revenue per user, retention rate, and conversion of enterprise and government orders.
• Whether Starlink enterprise applications in low-penetration industries such as aviation can accelerate.
• Whether ground-based AI computing power can expand from about 2.3GW at the end of 2026 to about 10GW over the next roughly two years as planned.
• Pricing, utilization, unit economics, and realization of hosting and inference revenue from AI cloud service agreements.
• Capital expenditures, free cash flow, debt financing, and potential equity dilution in the second half of 2026.
• Whether the company can reach a combined annual recurring revenue run rate of about $100bn in December.
• Share supply, trading, and price discovery after lock-up expirations.