Happy Monday,
We have a big week of earnings coming up with Microsoft, Google, Amazon, and other big tech giants you likely own. Now why does this matter for those of you only buying dividend stocks?
Well, the market (S&P 500) is heavily concentrated in these top tech stocks. So you need to pay attention!
Today, I’m going to do a deep dive on SpaceX ($SPCX) which reported last week. The results were very impressive. The stock was up 9% the following day, making it the seventh most valuable company in the world at a $2.11 trillion market cap when I filmed.
But the interesting thing here is that the rockets aren't where the money is anymore.
The Key Story
The Rockets Aren't Where the Money Is
📊 Research SPCX: DividendData.com/stocks/spcx
The largest business segment at SpaceX is now Super Intelligence (SI). It's already making more than Starlink, and more than the rocket business.
One of my favorite things as an investor is when a company's largest segment is its fastest growing. That's exactly what's happening here.
Super Intelligence: $7.56 billion this quarter, 51.9% of Q3 revenue, up from $2.6 billion in Q2.
Cloud and AI apps, inside Super Intelligence: Solutions and infrastructure, the cloud business they rent out plus AI applications like Grok and Grok Bot, is part of the Super Intelligence segment, not a separate one. It did $7 billion of that segment's revenue in the quarter, up 220% quarter over quarter.
Starlink: The connectivity business did $5.25 billion, 36% of revenue, up 69.5% year over year. It's their most profitable segment right now, with 13.6 million Starlink subscribers.
Rockets: The space business is the smallest by far, at $1.77 billion of revenue, or 12.1%.
The profit: Super Intelligence flipped to $431 million of operating income. That's perhaps the most interesting part of this report.
If you're a SpaceX investor in the coming years, you should likely expect Starlink to be the big cash cow, because there will be heavy reinvestment in Super Intelligence capex.
The Growth Driver
Renting Compute at the Best Payback in the Industry
The biggest growth driver is renting out the data centers they've built. The best way to think about it is gigawatts installed.
Capacity: 1.7 gigawatts at the end of Q3, and they expect to end 2026 with 2.5 to 3 gigawatts.
Next year: The forecast is 13 plus gigawatts by the end of 2027, with high certainty in 10.
Payback: They're seeing a less than one-year payback period on the compute they buy.
Pricing: Last quarter they guided to renting compute at $30 to $50 per watt. Now they're seeing $50 plus per watt.
SpaceX rents at spot price and is purposefully not locking in long-term contracts. They did short-term deals with Anthropic and Alphabet ($GOOGL) that either party can get out of, so they charge the current market rate.
That contrasts with long-term deals at Oracle ($ORCL), with expected paybacks often in the 2 to 3 year range. Neoclouds like CoreWeave ($CRWV) need those multi-year contracts to raise the debt, so they charge way below the current spot price.
On the call, Musk argued the value of compute is only going to go up. I happen to agree with that in the next few years. The models are getting so much better that the same rack of GPUs will generate more useful tokens that are more intelligent.
SpaceX also trains its own models and runs its own AI products, so it can use the compute internally or rent it out. Grok Bot already has 800,000 paid weekly users.
The Risk
Spending Well Ahead of the Cash Flow
Building out 10-13 plus gigawatts next year is going to involve a lot of expenses.
CapEx: $18.4 billion in Q2 and $19.6 billion in Q3.
Q4 guidance: $35 to $40 billion of capex this quarter alone.
2027: I'd expect at least $100 billion of capex next year, maybe even $150 or $200 billion.
They're spending well ahead of the cash flow coming in because they see this fast payback period. That’s the risk It's going to be very interesting to see if they can actually hit these numbers, because there are a lot of constraints.
One example: they're using the same casting machines they use for the rockets to cast the blades and vanes for natural gas turbines, the big bottleneck in turbine production.
My Take
If They Hit These Targets, SpaceX Starts to Look Cheap
The economics of SpaceX's business today don't have that much to do with rockets. The rockets aren't what's making this a $2 trillion company.
This year: The CFO targeted $100 billion of annual recurring revenue by the end of 2026, and they look on pace to hit it.
Next quarter: Q1 2027 revenue guidance of $33 to $37 billion, well ahead of street expectations.
The big one: Musk said that by the end of 2027 he could see an exit ARR of $500 billion to $1 trillion. Crazy target.
There's also speculation about a SpaceX and Tesla ($TSLA) merger. They talked about it a little on the call, but it was kind of a nothing burger.
My Take: I'm sounding pretty bullish, but that's because the growth and everything they're building is pretty impressive. If they hit these absurd revenue growth targets, then SpaceX stock starts to look cheap. Which is a crazy thing to say considering how overvalued the stock looked at based on it’s financials at IPO. So far in 2026, it's proven to be the right move to have avoided the IPO and to be patient if you're interested in buying the stock.
I used our new KPIs tab for this one, since a lot of SpaceX's historical financials aren't really relevant after how much the business has changed.
Dividend News
New Dividend Increases This Week
Get all Dividend Raises, Cuts, and Declarations: https://www.dividenddata.com/news
WDC - Western Digital raises quarterly dividend by 16.7% to $0.175/share
WCN - Waste Connections raises quarterly dividend by 10.0% to $0.385/share
AEP - American Electric Power raises quarterly dividend by 2.1% to $0.97/share
BRO - Brown & Brown raises quarterly dividend by 9.1% to $0.18/share
ET - Energy Transfer raises quarterly distribution by 0.7% to $0.3425/share
CQP - Cheniere Energy Partners raises quarterly distribution by 8.5% to $0.89/share
MUSA - Murphy USA raises quarterly dividend by 10.8% to $0.72/share
FIX - Comfort Systems USA raises quarterly dividend by 11.1% to $1.00/share
WST - West Pharmaceutical Services raises quarterly dividend by 18.2% to $0.26/share
ALLY - Ally Financial raises quarterly dividend by 16.7% to $0.35/share
HII - Huntington Ingalls raises quarterly dividend by 2.2% to $1.41/share
PNW - Pinnacle West raises quarterly dividend by 1.6% to $0.925/share
FCNCA - First Citizens BancShares raises quarterly dividend by 7.1% to $2.25/share
LAD - Lithia Motors raises quarterly dividend by 7.1% to $0.75/share
MTDR - Matador Resources raises quarterly dividend by 16.7% to $0.4375/share
BSM - Black Stone Minerals raises quarterly distribution by 9.4% to $0.35/share
DKL - Delek Logistics raises quarterly dividend by 0.4% to $1.14/share
SPH - Suburban Propane raises quarterly distribution by 7.7% to $0.35/share
GTY - Getty Realty raises quarterly dividend by 3.1% to $0.50/share
SIGI - Selective Insurance raises quarterly dividend by 11.6% to $0.48/share
ZWS - Zurn Elkay Water Solutions raises quarterly dividend by 18.2% to $0.13/share
MSEX - Middlesex Water raises quarterly dividend by 5.6% to $0.38/share
GRC - Gorman-Rupp raises quarterly dividend by 5.3% to $0.20/share
PB - Prosperity Bancshares raises quarterly dividend by 6.7% to $0.64/share
FCFS - FirstCash raises quarterly dividend by 9.5% to $0.46/share
AWI - Armstrong World Industries raises quarterly dividend by 10.0% to $0.373/share
MWA - Mueller Water Products raises quarterly dividend by 14.3% to $0.08/share
Earnings News
Huge Earnings This Week ($MSFT, $GOOGL, $AMZN, $V, $MA, $KO, $XOM, $CVX, $ABBV, $MO)
Top Dividend Stocks: Coca-Cola (KO), ExxonMobil (XOM), Chevron (CVX), AbbVie (ABBV), Altria (MO)
Top Growth Stocks: Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Visa (V), Mastercard (MA)
See every company reporting, day by day: Earnings Calendar, week of October 26
Earnings and Dividend News Links:
📅 Keep Investing. Stay informed.
Zach
Founder, Dividend Data
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