Elon Musk confirms Tesla and SpaceX are exploring a merger as SpaceX posts sharp Q3 beat

Elon Musk confirmed he is actively considering merging Tesla and SpaceX. The remarks came on an earnings call. SpaceX reported Q3 revenue of $14.6 billion, up 161% year-over-year, beating LSEG consensus estimates of $12.72 billion and sending SpaceX shares surging.

Special committees have been formed within both Tesla and SpaceX to examine a potential combination. No terms have been agreed. There is no guarantee a merger will happen. Musk said the committees have not reached agreement on terms of any transaction and there is no guarantee that they will, though he believes there is a lot of merit to merging and a lot to be gained. Tesla is valued at roughly $1.5 trillion and SpaceX at $2 trillion. A combination would mark one of the largest mergers in history. The two companies already share deep ties across chips, artificial intelligence, and software development.

SpaceX Q3: AI business fuels a sharp turnaround

SpaceX reported Q3 net income of $4.4 billion, a sharp swing from a net loss of $1.05 billion in the same quarter of the prior year. The company’s Super Intelligence segment, known as SI, generated revenue of $7.56 billion in the quarter, up ninefold from $813 million a year earlier. SI is now SpaceX’s largest business unit, dwarfing the company’s traditional rocket and satellite operations. Operating income from operations came in at $2.8 billion. Looking ahead, SpaceX forecasts Q1 2027 revenue between $33 billion and $37 billion, well above the average analyst estimate of $22.2 billion per LSEG. SpaceX made its Nasdaq debut in June in what was described as the biggest IPO ever.

“We delivered another strong quarter in Q3. Revenue grew an impressive 161% year-over-year, fueled by continued momentum in Connectivity and a clear inflection in our Super Intelligence business,” SpaceX Chief Financial Officer Bret Johnson said in the earnings release. Johnson pinned the results on recurring revenue from Starlink and significant expansion of SI infrastructure. Starlink’s total revenue rose to $5.2 billion in the three months to 30 September from $3 billion in the same period last year. SpaceX’s cloud compute business provides capacity for other tech companies including Anthropic and Google. Truist Securities analysts said in a note that demand appears “insatiable,” with SpaceX noting it could rent out its AI capacity several times over.

Why Musk says a merger makes sense

Musk said a full merger would make sense given the work each company does around chips, artificial intelligence, and software, and the deal would combine Tesla’s cars, robots, and self-driving technology with SpaceX’s rockets, data centers, satellites, and telecommunications operations. Terafab, a combined effort between Tesla and SpaceX to manufacture computer chips, was another signal that Musk sees his companies as more effective when working together. The Tesla Roadster unveiled last week was described as a futuristic electric car powered by SpaceX rocket thrusters. David Nicholson, chief technology advisor at The Futurum Group, called the Roadster a “symbolic embodiment” hinting at the two companies merging.

Governance hurdles and a conflicted CEO

Musk is chief executive of both companies and described himself as a conflicted party, meaning he cannot participate in shareholder discussions about a potential deal, and he is not included in either special committee considering the merger. At least 50% of Tesla’s shareholders would need to approve a combination, a threshold Musk described as “quite a high hurdle.” Even commenting on the possibility, Musk compared the experience to “tap dancing through a minefield.” Shareholders have backed Musk before. Last year, a majority of Tesla investors approved an unprecedented compensation package for Musk valued at around $1 trillion. Musk became the world’s first paper trillionaire earlier this year after SpaceX’s stock market debut in June.

Analysts see a question of when, not if

David Nicholson, chief technology advisor at The Futurum Group, said the likelihood of the merger is “100%” and “just a question of when.” Dan Sheehan, an investment analyst at Telos Wealth Advisors, said Musk will likely get his way in the next few years because shareholders will back the deal as the technologies the companies develop complement each other. Sheehan cautioned that Tesla shareholders will hold a “smaller slice of a much larger and more complex business” after a merger.

Market reaction and what’s next

SpaceX shares rose approximately 8.5% in premarket trading on Wednesday, while Tesla shares were up 1.4% in premarket. Shares of other space stocks including Rocket Lab, Intuitive Machines, and AST SpaceMobile were higher, and shares of cloud providers including Nebius, Coreweave, Iren, and Applied Digital also rose following Musk’s comments. Tesla reports next. The automaker is set to report its own quarterly results on Wednesday after the closing bell.