SpaceX Burned More Than $9.9 Billion of Free Cash Flow in a Single Quarter. Here's How Long Its $85.7 Billion IPO War Chest Actually Lasts.
The company does not have a massive runway to spend before running out of its IPO proceeds.
SpaceX, the ambitious rocket launch company recently raised $85.7 billion in its largest IPO ever, is aggressively investing in artificial intelligence (AI) infrastructure, satellite internet, and semiconductor fabrication. For the second quarter, the company burned through $9.9 billion in free cash flow due to these massive capital spending plans.
Management is calling for even more aggressive spending in upcoming quarters. SpaceX's AI business includes data centers, AI software tools like Cursor, and Grok Bot, and has seen a significant revenue boost with AI infrastructure revenue reaching $7 billion in the last quarter, up from $359 million a year prior. However, to achieve this growth, SpaceX is incurring heavy capital expenditures, with expected Q3 capital spending doubling to around $40 billion.
At its current burn rate, the IPO funds will only last for about two years, meaning SpaceX needs to generate positive free cash flow soon. The company plans to launch Starship payloads and advanced satellites for Starlink internet service, as well as develop orbital data centers for AI infrastructure. SpaceX aims for an annual recurring revenue (ARR) of $500 billion to $1 trillion by the end of 2027, which may be unrealistic.
While investors are rewarding SpaceX for its cash burn to accelerate revenue growth, the stock may be overvalued and risky, trading at a high price-to-sales ratio of 69.
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