Elon Musk: SpaceX (SPCX.US) Q4 revenue is expected to increase by approximately 70% quarter-on-quarter, with government contract income share falling below 10%

According to reports from Zhihu Finance APP, Elon Musk stated on Friday that SpaceX’s (SPCX.US) reliance on U.S. government procurement contracts will continue to decrease. Responding to users on social media platform X, he said that this quarter, payments from government agencies will account for less than 10% of SpaceX’s revenue, compared to 16.6% in the most recent quarter. On the same day, speaking at the Baron Capital Investment Conference, Musk gave an optimistic growth forecast, saying SpaceX’s Q4 revenue would rise by “about 70%” compared to the previous three months, and reaffirmed that annualized revenue is expected to reach $10 billion this year and exceed $50 billion by the end of 2027. SpaceX closed up 8.62% on Friday.

Government contract dependence continues to decline

The proportion of SpaceX’s revenue from government contracts continues its steady decrease. In the past, contracts with NASA and the U.S. Department of Defense supported SpaceX’s most profitable business partnerships. Now, SpaceX increasingly relies on a handful of clients renting its data center computing power—a business model for new AI cloud service providers (Neocloud) that Wall Street has recently viewed with skepticism.

SpaceX has become a mainstay of the U.S. space program, benefiting from numerous contracts for transporting astronauts for NASA and the Pentagon, and launching important national security satellites. Rival contractors have also complained that the U.S. Department of Defense tailors contract terms so narrowly that only SpaceX is able to win them.

Musk previously predicted that NASA, historically SpaceX’s largest client, would account for just 5% of company revenue this year. SpaceX still holds a key contract with NASA to use the Starship rocket to send humans to the moon no earlier than 2028.

AI computing power business takes over

In 2025, contracts with all government agencies collaborating with SpaceX are expected to account for about one-fifth of the company’s revenue. However, Anthropic PBC is now the company’s largest customer, contributing over one-third of revenue in the latest quarter.

But recent reports indicate that Microsoft (MSFT.US) is gradually phasing out its arrangement for renting AI compute power from Oracle (ORCL.US). This highlights the fragility of such contracts.

Over the past few quarters, SpaceX has been adjusting its revenue structure, shifting from reliance on government contracts to gaining more business in AI and Starlink satellite sectors.

Musk also stated that if there was an opportunity to acquire valuable spectrum resources, he would be willing to purchase a large wireless operator. Over the past year, SpaceX has acquired large tracts of spectrum to be used for its emerging satellite and terrestrial hybrid wireless network.

Executives including Musk noted in the most recent earnings call that SpaceX’s data center in Memphis, Tennessee, is seeing increased demand for compute power. This has enabled SpaceX’s AI business to achieve profitability for the first time.

SpaceX’s largest customer, Anthropic, can exit its agreement with SpaceX after the earliest notice period next year. Musk’s company also has contracts with other tech firms, including Google (GOOGL.US) under Alphabet.

Musk previously sought to differentiate SpaceX from other new cloud service providers and tech companies, pointing out that the company also generates revenue from its launch and connectivity businesses. But according to quarterly filings, growth in AI revenue has already surpassed these two business segments.

A few days before Musk made the above revenue forecast, the Democratic Party won control of both the House and the Senate. The billionaire spent over $445 million supporting Republicans, an action that could put his company at risk.