Shares of Reuters tumbled 7.5% in U.S. postmarket trading on August 4 after the company disclosed higher-than-expected capital expenditures on its artificial intelligence business. The decline followed the company’s inaugural quarterly report as a public company, which revealed that capital spending jumped to approximately $18.4 billion in the second quarter.
SpaceX Shares Drop Following AI Spending Surge
The stock has experienced significant volatility since its June public offering, the largest stock-market debut in history, which raised $86 billion. After reaching a closing record of $211 on June 16, shares have declined sharply, closing at $131.11 on Thursday—the first time the stock has closed below its $135 IPO price since the June 11 pricing. Investors who purchased shares at the $150 opening price have seen those investments contract by more than 11%.
The market downturn has erased more than $1 trillion in market value from the company’s peak and impacted the net worth of founder Elon Musk. According to the Bloomberg Billionaires Index, Musk’s net worth contracted to about $850 billion from a post-IPO peak of as much as $1.32 trillion.
Revenue Growth and Segment Performance
Despite the stock’s decline, SpaceX reported a second-quarter revenue of $7.8 billion, surpassing the average analyst estimate of $6.81 billion. This represents a significant increase from the $4.1 billion generated during the same period a year prior. The company reported a loss of 9 cents per share for the quarter, which was lower than the 24-cent loss forecasted by analysts.
The company’s financial performance was driven by several key divisions:
- Starlink: The satellite broadband division saw revenue grow 66% to $4.3 billion, with an operating profit of $1.7 billion.
- xAI: The AI unit, which merged with SpaceX in February, more than tripled its year-over-year revenue to $2.6 billion. However, the unit recorded an operating loss of $1.3 billion.
- Rocket Business: This core division reported a second-quarter operating loss of $542 million. SpaceX estimates the division carried 80% of all mass put into space during the quarter.
AI Ambitions and Cloud Services
SpaceX has heavily invested in its AI capabilities, with xAI driving much of the company’s current growth projections. The company stated that AI services and enterprise applications account for 90% of its addressable markets. To develop colossal server racks, SpaceX spent nearly $16 billion on capital expenditures.
To monetize its computing power, SpaceX has entered into several cloud-services arrangements. In June, Alphabet’s Google agreed to a deal paying $920 million per month through mid-2029. SpaceX also signed a similar agreement with Anthropic. Executives told analysts that the company is contracted for $6.7 billion in cloud-services revenue so far in the third quarter.
Elon Musk told analysts on a conference call that he expects the cadence of AI development to improve dramatically.
His broader strategy includes the goal of pioneering space-based data centers to bypass the resource and energy constraints facing terrestrial centers.
Future Risks and Market Outlook
While Wall Street analysts remain largely bullish—with FactSet reporting an average target price of $228 and Oppenheimer targeting $250—several risks persist. The flagship Starship rocket, a cornerstone for expanding satellite communications and orbital AI data centers, has cost $15 billion thus far and has faced delays, malfunctions, and explosive setbacks.
Further pressure on the stock price may arise from the expiration of stock-sale lockups. A lockup on up to 911.5 million shares expired on Thursday, allowing some pre-IPO insiders and employees to sell. Additionally, more than $100 billion worth of stock became eligible for sale later in the week.
The company’s financial stability has also been tested by debt; shortly after raising $75 billion in its IPO, SpaceX issued $25 billion in additional debt. Short sellers have also targeted the company, with paper bets reportedly approaching $4 billion.
Worth a look
