TABLE OF CONTENTS

1. Why SpaceX's First Earnings Report Matters
2. Post-Earnings Market Dynamics
3. How to Position Your Portfolio Ahead of SPCX Earnings
4. Frequently Asked Questions (FAQs)

Dec 8, 2019 Hawthorne / Los Angeles / CA / USA - SpaceX (Space Exploration Technologies Corp.) building. SpaceX's first earnings report as a public company is on August 4.

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Space Exploration Technologies Corp. (NASDAQ: SPCX) reports second quarter results after the close on Tuesday, Aug. 4, marking its first earnings report as a public company.

Few companies have entered their inaugural earnings release under comparable circumstances. After pricing at $135 per share in June's record-setting IPO and reaching an intraday high of $225.64 on June 16, the stock closed at $112.55 on July 28, roughly half its peak and approximately 17% below the offering price. Options markets are pricing an implied move of roughly 15% following the earnings release.

The earnings release arrives as investors attempt to reconcile two very different narratives. The operating business continues to expand across launch services, satellite broadband and artificial intelligence, while the stock has weakened under the weight of valuation concerns, unprecedented AI capital expenditures, lock-up expirations and one of the largest short positions in the market. The distinction is important because improving business fundamentals and near-term share price performance are not always driven by the same factors.

Why SpaceX's First Earnings Report Matters

This will be the first opportunity for public investors to evaluate audited quarterly results for what has evolved into a three-segment enterprise. Following the integration of xAI and X in February, SpaceX is no longer simply a launch company supported by a broadband business. The company now reports results across space, connectivity and AI — with the AI segment consuming capital faster than the other two businesses combined.

The lack of operating history under the new corporate structure has produced an unusually wide range of analyst expectations. Consensus earnings estimates span from a loss of $1.26 per share to a profit of $0.33, highlighting the uncertainty surrounding AI investment, future monetization and capital allocation. Rather than focusing solely on whether earnings exceed consensus, investors are likely to place greater emphasis on Starlink profitability, AI spending, launch economics and management’s outlook for the rest of 2026.

Starlink Remains the Primary Value Driver

Starlink remains the company’s most valuable business and the principal driver of long-term intrinsic value. While often viewed as a single broadband platform, the S-1 describes five distinct businesses operating on the same satellite constellation: residential, business, maritime, aviation and government. Each serves a different customer base, carries different margins and contributes differently to long-term profitability.

The economics vary dramatically. Aviation generates annual revenue approaching $300,000 per aircraft compared with roughly $960 for a residential subscriber, a pricing differential of more than 300-fold. Subscriber growth alone provides only part of the investment story. The more meaningful question is whether the revenue mix continues shifting toward the higher-margin commercial and enterprise offerings.

Connectivity generated $11.4 billion of revenue and $4.4 billion of operating income during 2025, with operating income more than doubling year over year. Investors will focus carefully on any additional disclosure around customer mix, pricing, margins and capital efficiency, as those metrics are likely to provide a clearer indication of long-term earnings power than headline subscriber additions.

AI Investment Will Likely Dominate Investor Questions

If Starlink represents the foundation of the investment thesis, artificial intelligence represents its largest uncertainty.

AI capital expenditures reached $7.72 billion during the first quarter of 2026 alone, compared with $12.73 billion during all of 2025. Consensus expectations project total company capital expenditures of approximately $48.7 billion this year, increasing to roughly $118.4 billion by fiscal 2028.

The broader market has become increasingly skeptical of AI spending that lacks visible returns, making capital allocation one of the most important topics on the earnings call. Investors are no longer questioning whether companies can spend aggressively on AI infrastructure. The focus has shifted toward when those investments begin producing durable cash flows and acceptable returns on invested capital.

One disclosure deserves particular attention. The prospectus indicates that Anthropic pays approximately $1.25 billion per month for compute capacity through 2029 under an agreement that may be terminated by either party with 90 days' notice. While the contract provides substantial recurring revenue, its relatively short termination provision makes customer concentration and renewal risk important variables to monitor.

Commercial Launch Cadence

Launch operations remain the foundation upon which the broader SpaceX ecosystem is built. The company's ability to launch its own satellites at costs unavailable to competitors continues to reinforce the economics of Starlink and its expanding AI infrastructure.

SpaceX completed 165 orbital launches during 2025 and another 40 during the first quarter of 2026. Only seven of those first-quarter launches served external customers, while 33 supported Starlink deployment and AI infrastructure. Those internal missions do not generate reported launch revenue, yet they substantially reduce transportation costs across the broader enterprise. SpaceX has effectively become its own largest customer, transforming launch capability into a competitive advantage that extends well beyond the space segment.

PitchBook estimates the launch business generated approximately $5.2 billion of revenue and $1.7 billion of EBITDA during 2025, representing a margin of roughly 33%. Investors will likely focus on any discussion surrounding starship development, launch cadence and further reductions in launch cost per kilogram, all of which could improve profitability across the broader enterprise.

Valuation Reflects Uncertainty More Than Consensus

Wall Street has not reached a meaningful consensus on SpaceX's valuation. Thirty-four analysts surveyed by S&P Global assign an average 12-month price target of $236.71, yet published estimates range from $62 to $800.

A $738 dispersion for a company of this size says less about valuation than it does about uncertainty. Analysts generally agree on the economics of Starlink and the launch business. The disagreement centers almost entirely on the pace at which AI investments will convert into sustainable earnings and free cash flow.

Applying ERShares’ proprietary VC Lens framework, SpaceX continues to score highly on the Entrepreneur Factor. Elon Musk remains the founder CEO, owns approximately 42% of the economic interest, controls 82.4% of the voting power and continues allocating capital across businesses with unusually high barriers to entry. Those characteristics have historically created substantial long-term shareholder value.

At the same time, execution risk has increased. Management attention is now divided among launch services, satellite broadband, artificial intelligence, a global social platform and Tesla. Since reaching its June high, SpaceX has surrendered roughly the market capitalization equivalent of an entire Tesla. Even so, current valuation increasingly appears supported by Starlink's cash-generation potential alone. That should not be interpreted as evidence that the stock has established a near-term trading floor.

Post-Earnings Market Dynamics

The greatest risk surrounding SpaceX may not be the earnings report itself, but the sequence of events that follows.

First Lock-Up Expiration

The first lock-up expiration occurs on Thursday, Aug. 6, just two trading days after earnings, releasing up to 911.5 million shares, representing approximately $103 billion at current prices and more than 1.6 times the existing public float. A second tranche of 455.8 million shares required the stock to remain above $175.50 for five of the 10 trading sessions preceding earnings and, based on current trading levels, is not expected to be released. Even so, Thursday should not be viewed as the end of the supply overhang. Additional lock-up tranches are scheduled 70, 90, 105, 120 and 135 days after the offering, followed by another 28% after third-quarter earnings. The remaining shares are released in December, while Musk's holdings remain restricted until mid-2027.

The implication is straightforward. Investors anticipating a single supply event are likely underestimating the duration of the process. The increase in tradable shares is scheduled to unfold over several months rather than a single trading session.

A Larger Float Could Also Increase Passive Demand

One consequence of the expanding public float has received considerably less attention. While additional shares increase potential selling pressure, they also increase the float-adjusted market capitalization used by major index providers when determining constituent weights.

If SpaceX is added to widely followed benchmarks such as the Nasdaq-100, passive investment vehicles, including the Invesco QQQ Trust (QQQ) and other index-tracking funds, funds would generally be required to purchase shares based on the company's assigned weighting. As additional lock-up tranches are released and the public float expands, SpaceX may become eligible for larger passive allocations than would have been possible immediately following its IPO.

This creates an important offset to the supply narrative. Investors often focus on newly unlocked shares entering the market while overlooking the possibility that a larger float can also support greater institutional and passive ownership over time. The net effect will depend on both investor selling decisions and future index inclusion, but the relationship is more nuanced than a simple increase in supply.

Market Structure

Market structure presents a second risk that receives considerably less attention.

According to S3 Partners data as of last Saturday, July 29, approximately 219 million shares were sold short, representing approximately $25 billion of exposure, or about 34% of S3's float measure. Utilization had reached 94.4%, leaving only 12.79 million shares available to borrow, down from approximately 34 million one month earlier. At the recent pace of borrowing, that remaining inventory could be exhausted within a day or two of the earnings release.

That distinction matters because restricted shares cannot be lent. Once existing borrow inventory is depleted, additional short selling becomes constrained by share availability rather than investor demand. The Aug. 6 lock-up expiration therefore changes more than the supply of tradable shares. It also replenishes the securities lending market by making newly unlocked shares available for borrowing, effectively removing the mechanical ceiling that has limited additional short positioning.

Not All Shorts Are Bearish

The composition of the current short interest may prove equally important.

The observed trading behavior appears more consistent with hedging activity than with traditional directional short selling. Short interest increased from roughly 120 million shares on June 30 to 217.4 million shares on July 29 while the stock declined from approximately $170 to $116. Directional investors sitting on gains of that magnitude would typically reduce exposure, particularly with days to cover of only 3.07. Instead, aggregate short interest continued to expand throughout the decline.

The economics point in the same direction. Borrowing shares at approximately 3.86% represents a financing cost of roughly $2.7 million per day on approximately $25 billion of short exposure. That remains materially less expensive than establishing equivalent downside exposure through options immediately ahead of an earnings event implying a 15% move. A rational hedger would be expected to exhaust the lowest-cost instrument first before migrating to more expensive alternatives. That sequence is precisely what has occurred.

This distinction carries important implications for how investors interpret post-earnings trading.

A conventional short seller must repurchase shares in the open market to close a position. A shareholder hedging restricted stock generally does not. Once the underlying shares become freely tradable, those shares can simply be delivered against the borrowed position, allowing short interest to decline without creating incremental buying pressure.

That provides investors with a clear framework for evaluating the market's reaction after August 6. If short interest declines sharply without corresponding buy-side volume, the evidence would support the view that a meaningful portion of current short exposure reflected hedging activity. If short interest declines only alongside substantial buying, or remains elevated despite the expanded borrow supply, the market would be signaling a more traditional bearish view of the company's prospects.

Either outcome will provide important information. The distinction is likely to shape trading over the weeks following earnings as much as the earnings report itself.

How to Position Your Portfolio Ahead of SPCX Earnings

I have an affiliation with Babson College, ERShares, the XOVR ETF and the Entrepreneur 30 Total Return Index (ER30TR). I am founder CEO of the XOVR ETF that holds a 14% weight ($200M+ position) in SpaceX. The intent of this article is to provide objective information. However, readers should be aware that I may have a financial interest in the subject matter discussed.

As with all equity investments, investors should carefully evaluate all options with a qualified investment professional before making any investment decision. Private equity investments, such as those held in XOVR, may carry additional risks, including limited liquidity, compared to traditional publicly traded securities. It is important to consider these factors and consult a trained professional when assessing suitability and risk tolerance.

SpaceX presents investors with an unusual combination of long-term operating momentum and elevated near-term trading uncertainty. The business continues to expand across launch services, broadband connectivity and AI, yet the stock faces a series of technical events that may influence trading independently of the company's underlying fundamentals.

Position sizing deserves as much attention as investment direction. Options markets imply a post-earnings move of roughly 15%, the stock has exhibited unusually high volatility since its IPO, and the first lock-up expiration follows only two trading days after earnings. Those factors increase the likelihood that short-term price movements will reflect market structure as much as operating performance.

Diversification within the space sector has provided little protection in recent months. Rocket Lab, AST SpaceMobile and Planet Labs have each declined more than 50% from their late-May highs, with concentrated space-related funds peaked around May 28 before moving sharply lower. Correlation across the sector has remained unusually high, suggesting that meaningful diversification for long-term investors requires exposure beyond the space industry itself.

Investors considering short positions face a different set of risks. Data from S3 Partners shows that short interest in SPCX is high, but the risk of a major short squeeze appears moderate. This suggests that most short sellers should be able to exit their positions without significant disruption.

Those proprietary measures suggest that while short positioning has become exceptionally crowded, many existing shorts remain profitable and can exit relatively easily, with days to cover of only 3.07. A stronger-than-expected Starlink update could alter that dynamic quickly, particularly before additional borrow becomes available following the August 6 lock-up expiration.

SpaceX's first earnings report represents an important milestone, but it is unlikely to provide all of the answers investors are seeking. Starlink's operating performance, AI capital allocation and launch economics will shape the company's long-term value, while lock-up expirations, securities lending, and short positioning may have a greater influence on near-term trading. Separating business fundamentals from market mechanics may prove to be the most important takeaway from SpaceX's first earnings season.

Disclosure: This article is provided for informational purposes only and does not constitute investment, legal, or tax advice, no offer to sell or solicitation of an offer to buy any security is being made, readers should consult a qualified professional before making any investment decision. Investors should consult each fund’s prospectus and most recent disclosures before investing.

Past performance is no guarantee of future results. Please refer to the following link for additional disclosures: https://lnkd.in/e29X6rN