Elon Musk told SpaceX investors on 20 October that committees of independent directors at SpaceX and Tesla are evaluating a merger of the two companies. At about USD 2.1tn and USD 1.6tn of market value, the combination would be the largest corporate merger on record. SpaceX revenue rose 161% in the third quarter to USD 14.6bn, and its capital expenditure reached USD 19.6bn. Tesla revenue was flat at USD 28.0bn, with free cash flow of USD 1.5bn. A merger would put Tesla’s cash flow and shareholder base behind SpaceX’s spending plans, inside a share structure that gives Musk more than 80% of the votes at SpaceX.
Tesla presented the new Roadster at a SpaceX test site in Texas on 15 October. The top version, called Rocket, is listed on Tesla’s website with a “full flight system” and is available by invitation only, and a Thrust version carries cold-gas thrusters derived from SpaceX technology. Tesla quotes 60 mph in 1.6 seconds for the base car and a top speed above 230 mph. The company has announced no price, plans to start production in 2028 and does not expect high volumes, and some buyers have held deposits of up to USD 250,000 since the car was first announced in 2017. The Roadster will not be a material source of revenue for either company. Its thrusters are the most visible example of how much the two companies already share.
Tesla’s proxy filing this month lists USD 430m of Megapack battery sales to SpaceX data centres in 2025, USD 143m of vehicle sales to SpaceX and USD 3.3m of advertising that Tesla bought on X, the social network that now sits inside SpaceX. Tesla also holds a USD 2bn investment in SpaceX. The two companies are building Terafab, a chip plant in Texas, together with Intel, and run a robotics joint venture called Digital Optimus. Tesla’s chargers use Starlink connectivity, several executives hold roles at both companies, and one director sits on both boards.
Business between Tesla and SpaceX in 2025, and their joint projects
Source: Company data, InterCapital Research
SpaceX revenue from its SI segment, which includes the AI business it absorbed in February, rose from USD 0.8bn a year earlier to USD 7.6bn in the third quarter and overtook connectivity revenue of USD 5.2bn. Connectivity revenue grew 69%. Starlink consumer subscribers rose from 7.2m to 13.6m, while average revenue per consumer subscriber fell from USD 83 to USD 69 a month. SpaceX reported operating income of USD 2.8bn against a loss of USD 0.3bn a year earlier, and net income of USD 4.4bn. The company guided first-quarter 2027 revenue to USD 33-37bn, more than Tesla reported in any of the past five quarters.
Quarterly revenue by segment, SpaceX and Tesla, Q3 2025 to Q3 2026, and SpaceX guidance for Q1 2027 (USD bn)
Source: Company data, InterCapital Research
SpaceX spent USD 19.6bn on capital projects in the third quarter, USD 16.4bn of it in the SI segment, and guides to USD 35-40bn for the fourth quarter. Capital expenditure for the first nine months reached USD 48.1bn, against USD 13.1bn of operating cash flow. The June listing raised USD 86bn and was followed by USD 25bn of new debt. SpaceX ended September with USD 89.9bn of cash and marketable securities and USD 38.8bn of debt and finance leases. Installed computing capacity in the SI segment reached 1.7 GW, from 0.6 GW a year earlier, against a target of 2.5-3 GW by the end of the year.
Tesla reported third-quarter revenue of USD 28.0bn, unchanged on a year earlier. Automotive revenue fell 3% and energy generation and storage revenue fell 16%, while services and other revenue, which includes self-driving subscriptions and the Robotaxi service, rose 33%. Paid self-driving subscriptions reached 1.74m, up from 1.04m, and 75% of vehicles delivered in the quarter carried one. Operating income fell 56% to USD 0.7bn as research spending rose. Operating cash flow of USD 6.3bn covered capital expenditure of USD 4.7bn, and Tesla lowered its full-year capital expenditure estimate to about USD 20bn from more than USD 25bn. Musk expects annual capital spending in the tens of billions of dollars by 2028.
Quarterly capital expenditure, SpaceX by segment and Tesla, with Tesla operating cash flow and Q4 2026 guidance (USD bn)
Source: Company data, InterCapital Research
Tesla would bring about two thirds of the combined company’s quarterly revenue. SpaceX would bring about 80% of its operating income and capital expenditure and two thirds of its cash. Musk owns about 20% of Tesla, where individual investors hold around 30% of the votes, and controls more than 80% of the votes at SpaceX through the share structure adopted at its listing. An all-stock acquisition of Tesla by SpaceX, the structure several investors expect, would most likely leave him in control of the combined group. Musk has said Tesla shareholders will decide, and has described winning the support of half of Tesla’s shares as “quite a high hurdle”. Tesla’s large business in China adds a regulatory obstacle, given SpaceX’s ties to the US government.
Tesla and SpaceX shares of a combined company, by measure (%)
Source: Company data, InterCapital Research.
Published sum-of-the-parts valuations of SpaceX already apply very different multiples to its businesses, about 5 times revenue for the AI business and 58 times for connectivity. A carmaker with a 2.6% operating margin in the third quarter would add a third profile to the same share. The industrial case for the deal rests on products that do not yet sell at scale: Robotaxi and the Optimus robot at Tesla, with Optimus sales to outside companies targeted for the end of 2027, and the computing capacity and Starlink network that SpaceX would provide to run them. Terafab plans its first test chips next year and volume production in late 2028, a timetable Musk describes as carrying “big error bars”.
We would watch four things. The special committees have not named their members, and their recommendation will set the exchange ratio and any premium for Tesla shareholders. The Tesla vote requires the support of a majority of shares, on a register where individual investors carry weight. SpaceX’s fourth-quarter capital expenditure of USD 35-40bn will show how far its own cash flow and balance sheet can carry the build-out before Tesla’s cash joins it. Regulators in the US, the EU and China will each review a company that sells cars in China and works for the US government.