Elon Musk has confirmed that SpaceX and Tesla have established special committees to discuss a potential merger, describing the combination of his two companies as “a good idea” while cautioning that a deal is far from certain.
Speaking during an investor conference call on Tuesday, Musk said the decision would rest with the independent committees of both companies. Following his remarks, SpaceX shares rose 8% in extended trading, while Tesla shares gained 1.8%.
The announcement came as SpaceX reported its first profit as a public company and highlighted growing demand for its data-centre capacity amid the artificial intelligence boom.
Musk also said he expected annual recurring revenue to reach between $500 billion and $1 trillion by the end of 2027.
Independent Committees Review Potential Merger
Musk has previously raised the possibility of combining SpaceX and Tesla, pointing to increasing overlap between their technologies and long-term ambitions. Speculation about a potential SpaceX acquisition of Tesla has intensified, with Barclays suggesting last week that an announcement could come before Tesla’s annual meeting in December.
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“I think it would be a good idea, but it’s really up to the special committees of both companies,” Musk said.
He added that he could not participate in the committees’ discussions because of his personal interests in both businesses.
According to Musk, the committees were formed at shareholders’ request, and investors would ultimately need to approve any transaction.
He argued that a merger could create opportunities in advanced AI software, chip design, robotics, satellite connectivity and space-based computing infrastructure.
However, Musk stressed that it would be premature to assume a deal would happen. The committees have not agreed on transaction terms and could ultimately decide against a merger.
A person familiar with the discussions told Reuters that talks began in recent weeks and could result in SpaceX acquiring Tesla. The source, who was not authorised to speak publicly, also said Tesla had been working with an investment bank to advise on the discussions.
Musk owns nearly one-fifth of Tesla and just under half of SpaceX, according to the report. Analysts have said a merger could give him control over the combined company.
AI Revenue Transforms SpaceX’s Business
SpaceX’s revenue climbed 161% year-on-year to $14.58 billion for the three months ended September 30, according to the reported financial results.
Revenue from its AI business surged nearly tenfold to $7.56 billion, largely driven by renting data-centre capacity to developers, including Anthropic, Google, part of Alphabet, and Reflection AI.
The results offered fresh evidence that SpaceX’s substantial investment in AI infrastructure is generating revenue, although its spending on computing capacity has also increased sharply.
Capital expenditure nearly tripled to $19.6 billion during the quarter. Chief Financial Officer Bret Johnsen said the company expected capital spending to reach between $35 billion and $40 billion in the fourth quarter.
“SpaceX delivered the quarter the bulls wanted, at least on the top line,” said Will Rhind, chief executive of asset manager GraniteShares.
“The story now is all about AI. The compute contracts signed earlier this year are turning into revenue faster than a lot of people thought,” he added.
SpaceX’s AI operations span Grok, the social media platform X and its expanding data-centre business. The company reported net income of $4.4 billion, compared with a loss of $1.1 billion a year earlier.
Adjusted earnings reached 45 cents per share, according to IBES calculations, exceeding analysts’ average estimate of 13 cents.
Terafab Project Targets 2028 Volume Production
Musk also outlined the timeline for Terafab, the chip-manufacturing joint venture between SpaceX and Tesla.
He said the project was expected to produce its first test chip around May or June next year, with volume production targeted for the third quarter of 2028.
The initiative is among the areas where a closer relationship between the companies could offer strategic advantages, particularly as demand grows for specialised chips used in AI systems and robotics.
Musk also cited the potential for collaboration in superintelligence software, mass-to-orbit infrastructure and satellite connectivity.
Starlink Subscriber Growth Exceeds Forecasts
SpaceX’s Starlink satellite-internet business continued to expand, reaching 13.6 million subscribers in the third quarter. The figure exceeded analysts’ expectations of 12.19 million.
The service has grown through additional satellite launches and a broader range of offerings for households, businesses, aviation, maritime customers and government agencies.
However, average monthly revenue per subscriber has declined as Starlink expands into more price-sensitive markets. The average fell from $99 in 2023 to $69 in the third quarter.
The company has indicated that expansion beyond wealthier countries could put further pressure on average revenue per user as lower-priced plans become more widely available.
Starship Remains Central to Long-Term Strategy
Despite the rapid growth of AI-related revenue, SpaceX’s longer-term ambitions remain closely tied to Starship, its next-generation reusable rocket system.
Starship has yet to enter commercial service but is expected to support the deployment of higher-bandwidth Starlink satellites and potentially enable orbital AI-computing infrastructure.
Developing a reliably reusable launch vehicle remains a key technical and financial challenge. SpaceX’s space business also includes commercial launches, government missions and Starship development, all of which involve substantial costs and uncertainty.
For now, the company’s financial profile is increasingly shaped by AI computing and data-centre services, alongside its established satellite-internet operations.
Whether a merger with Tesla proceeds remains unresolved, with both companies’ independent committees still reviewing the potential transaction.
