SpaceX’s outstanding performance, but stock price plummets! Goldman Sachs supports: AI business disrupts valuation logic, Citi sees long-term target at $900

SpaceX delivered its first earnings report since going public, with all three major business lines exceeding expectations, prompting Wall Street analysts to collectively raise their valuation forecasts as the investment logic for this space technology giant undergoes a systematic revaluation by the capital markets.

SpaceX’s total revenue for the second quarter of 2026 reached $7.814 billion, approximately 17% higher than Goldman Sachs’ forecast and about 15% above the market consensus; GAAP operating profit also exceeded both Goldman Sachs and market expectations by approximately 92% and 91%, respectively.

According to Wind Chaser Trading Desk, Goldman Sachs immediately raised SpaceX's 12-month price target from $205 to $220 while maintaining its Buy rating, implying about 76% upside relative to the current share price of $125.33. They believe SpaceX shares have dropped about 42% from their post-IPO peak close, making the current risk-reward ratio attractive. Citi is also maintaining its Buy rating and $200 price target, reiterating its previous long-term outlook above $900. As of press time, SpaceX shares were down 7.46% in after-hours trading.

During the earnings call, management revealed that the company now sees a clear path to reaching a $100 billion Annual Recurring Revenue (ARR) by December, and has brought forward its ambitious $1 trillion revenue target from 2031 significantly to 2030, or possibly “as early as 2029,” far surpassing current market expectations.

AI Business Is the Biggest Surprise, Disrupts the Existing Valuation Framework

The AI segment was the biggest positive surprise this quarter. According to Citi, the division reported $2.6 billion in revenue for Q2, about 24% above their expectations and 27% above the market consensus; adjusted EBITDA reached $1.146 billion, over a hundredfold greater than Citi's estimate of roughly $10 million, and a stark reversal from the market consensus of negative $300 million.

Goldman Sachs analysts Eric Sheridan, Alex Vegliante, and Julia Fein-Ashley noted in their report that AI’s outperformance was mainly driven by cloud service contract income. Management explained that the supply-demand imbalance for AI computing power means each newly signed cloud services contract offers better economics than the last, with the capital payback period for AI now less than a year—a metric that is forcing the market to reassess SpaceX’s capital allocation logic.

In terms of scale, management has raised its end-of-2027 ground compute power target from Citi’s previous 4.2GW to between 5 and 10GW, and disclosed that roughly 20GW in new projects are now in the pipeline. The supply chain is cited as the main bottleneck, rather than demand. Goldman Sachs has significantly raised its AI revenue forecasts for 2026 to 2028, with the 2027 forecast jumping from $34.467 billion to $70.336 billion, an increase of over 104%.

Citi’s report references its previously published initiation coverage, indicating that this quarter’s AI outperformance could become a sustained driver for future upside surprises, further reinforcing its long-term target price of over $900.

Starlink Continues to Expand, Terrestrial Network Plans Revealed

The Connectivity business maintained its strong momentum. According to Goldman Sachs, the division’s Q2 revenue was $4.291 billion, 8.6% above their forecasts; adjusted EBITDA was $2.597 billion, 12.3% above expectations. Consumer Starlink broadband users have reached 12 million, slightly above Goldman’s estimate of 11.8 million.

Management expressed optimism over the backlog of enterprise and government clients and noted that Starlink’s market penetration in aviation remains below 10%, leaving substantial room for growth. Goldman expects medium-term cash flows from Connectivity to be a major funding source for deep space exploration and AI capital needs.

Citi Research disclosed a new strategic move: SpaceX stated that the spectrum acquired from EchoStar includes terrestrial network components. Starlink plans to build a ground network, offering connectivity for mobile bands via small base stations and femto cells, aiming to provide bandwidth superior to existing operators. Citi believes this could position SpaceX as a potential fourth major player in the U.S. mobile market, though adding that large-scale implementation will be challenging without a nationwide MVNO agreement.

Notably, Starlink ARPU was below Goldman forecasts but remained stable quarter-on-quarter. Management indicated that as the company pursues localized strategies, blended ARPU may decline over time, which is consistent with Goldman’s prior expectations.

Starship Progress Accelerates, Launch Milestone Approaching

The Space business generated $962 million in Q2 revenue, 17.2% ahead of Goldman Sachs’ forecast; adjusted EBITDA was negative $205 million, but losses narrowed significantly, surpassing Goldman’s forecast by 57.1%.

Management provided additional updates on Starship. According to Citi Research, Starship's 14th flight test is expected to deliver V3 Starlink satellites into operational orbit, with a possible first attempt at a “chopsticks arm” catch of the second stage—Citi sees this milestone, if achieved, as a key value catalyst supporting their long-term $900 price target. Management also confirmed that even if the 14th flight does not achieve this, synchronised first and second stage catching is expected to be completed by year-end. In addition, they said the Starship heatshield issue has been resolved, and once validated, no major technical obstacles remain for full rapid reusability.

Goldman noted SpaceX has established dominance in the commercial space launch market, persistently driving down the cost to orbit per kilogram through vertical integration, making it hard for competitors to replicate. Goldman expects the firm to complete five launch pads by the end of 2027, potentially warranting upward revisions to launch cadence assumptions in the next 12-18 months.

Forecasts Raised Significantly, High Capital Expenditure Main Concern

This earnings report prompted significant revisions to Goldman Sachs’ earnings forecasts for SpaceX. Its 2026 revenue estimate was raised from $38.244 billion to $47.635 billion, with GAAP EBIT jumping from $1.015 billion to $10.063 billion, and full-year diluted EPS revised from a loss of $0.09 to a profit of $1.00. Looking ahead to 2027, Goldman expects revenue to further expand to $107.432 billion, about 55% higher than its prior forecast.

Goldman uses a Sum-of-the-Parts (SOTP) valuation, discounting 2029 projected segment results to a $220 base target price, representing about 90% upside; the optimistic scenario is $285. Citi’s $200 target is based on the average from three valuation methods, while its long-term $900+ target is predicated on full Starship reusability and at-scale orbital AI computing.

It is noteworthy that Goldman expects capital expenditures to remain high. Management indicated that quarterly capex levels in the second half of 2026 will be similar to Q2, leading Goldman to raise its full-year 2026 capex forecast to $64.589 billion; 2027 capex is forecast to reach $189.115 billion, with free cash flow expected to remain negative for several years. Both institutions note that, thanks to high-return AI capex, sustained heavy investment is not necessarily a major risk, but factors such as concentrated governance, related-party transactions involving the founder, and expectations for large-scale equity dilution remain potential investor concerns.