Morningstar raises SpaceX fair value on data center growth, keeps 1-star view

Q3 results and revenue mix

Morningstar Australia says SpaceX released third-quarter earnings on Oct. 20. It reported that revenue increased 161% since 2025 to $14.6 billion. The report said the increase was led by a sequential quintupling of AI revenue, which was driven by neocloud rentals. Morningstar also said Starlink revenue rose 69.5% and generated $2.4 billion in operating profit. It added that AI contributed $431 million in operating income, while the launch business broke even.

Why Morningstar says the stock matters

According to Morningstar Australia, SpaceX has a large opportunity for profitable growth in Starlink, but the widest range of possible outcomes for the company is tied to its AI ventures. The report said those ventures currently depend on quickly adding computing capacity and renting it out. Morningstar said the rapid buildout of AI computing capacity has been a success so far, but it does not think demand will outstrip supply forever, especially as more capacity is added. The firm said it examined several long-term payoff scenarios for large AI infrastructure spending, reflecting recent uncertainty in AI-related shares.

Fair value estimate and valuation view

Morningstar Australia said it raised its fair value estimate for SpaceX to $70 per share from $62. The firm said the increase reflected better near-term progress in scaling terrestrial data centers, partly offset by a lower view of the long-term returns from AI services relative to the large investments required. Morningstar said SpaceX remains a 1-star stock and is significantly overvalued versus its long-term estimate. It said the shares were down more than 2% after earnings, but still trading at about twice its fair value estimate.

How Morningstar breaks down the business

In Morningstar’s report, the competitively advantaged space and connectivity businesses were valued together at $35 per share, plus $7 per share for cash on hand. The report said the AI business adds $28 per share in its most likely base-case scenario. Morningstar said that in this scenario, orbital data centers prove workable, aided by lower launch costs for large payloads on Starship. It also said SpaceX eventually deploys and commercializes about 31% of the forecast AI computational capacity. Morningstar put a 55% probability on that scenario, while noting it is far from guaranteed.

Moat, balance sheet and risks

Morningstar Australia said SpaceX has a narrow economic moat because of its cost advantages in space and connectivity, but that heavy AI spending limits the rating. The report said those businesses represented 13% and 60% of revenue by mid-2026, respectively, and that the company’s reusable rocket design and launch experience support a durable cost edge. It also said SpaceX had $38.8 billion in debt at the end of the third quarter of 2026, along with about $90 billion in cash and securities after raising $86 billion in its IPO. Morningstar said that left SpaceX with a net cash position of around $12.5 billion, or $51 billion including marketable securities, and noted the company raised $40 billion in debt in late October to lease data center equipment. The report said Starlink is expected to be the main near-term cash flow driver, with operating profit projected to exceed $5 billion in 2026.

Morningstar said the uncertainty rating remains very high because SpaceX faces risks tied to execution, technology changes, regulation, governance and dependence on key people. It said Starship has not yet shown scalable upper-stage reusability, and that Starlink’s long-term growth faces regulatory and technological uncertainty. The report also said Elon Musk’s majority voting control limits minority shareholders, and that his leadership of multiple companies adds to key-person risk.

Board committees and investor views

Morningstar Australia said it was not surprised that SpaceX and Tesla formed board committees to examine a possible business combination. The firm said such a deal could make cooperation on several projects simpler, but would depend on terms acceptable to a majority of Tesla shareholders. Morningstar said it does not think a combination is inevitable, but believes it is highly likely, especially if SpaceX stock stays expensive.

The report also summarized bullish arguments, including SpaceX’s impact on launch economics, its lead over competitors, and Starlink’s subscriber and capacity growth. It also listed bearish arguments, including the stock’s demanding valuation, the limits of the dual-class structure for minority shareholders, and the possibility that insider sales after the IPO could pressure the share price.