Bond Update: SpaceX 2Q26 Earnings - Mixed Signals, Caution Advised

SpaceX, founded by Elon Musk, completed its historic IPO in June 2026 (raising approximately USD 85.7 billion in net proceeds) and subsequently issued USD 25 billion in five tranches of senior unsecured notes. The group released its first quarterly report since the IPO in August, providing bondholders with a complete financial perspective for the first time, which we will break down below.

SpaceX's revenue increased, but profitability remains constrained

SpaceX's revenue for the first half of 2026 was USD 12.5 billion, a significant YoY increase of 53.7%. While the revenue figures appear strong, a closer look at the segments reveals a mixed picture.

Connectivity (Starlink) was the only segment generating operating profit: first-half revenue was USD 7.6 billion (up 49.1% YoY), with an operating profit of USD 1.7 billion. Although the number of users reached 12 million, doubling YoY, the average revenue per user (ARPU) decreased from USD 85 to USD 66, reflecting that the growth was achieved by sacrificing price for volume.

AI (Artificial Intelligence) saw the fastest growth but also incurred the highest costs: revenue was USD 3.4 billion (up 231% YoY), mainly from new cloud computing power contracts; however, it recorded an operating loss of USD 3.7 billion. The adjusted EBITDA for this segment has turned positive to USD 4.7 billion in the financial statements, but the added depreciation and amortization costs represent future economic costs for computing equipment with relatively short asset lifespans.

Space (launch services) revenue was USD 1.6 billion, the only one of the three segments to record negative growth. This was due to increased R&D expenses for the Starship rocket, which led to an operating loss of USD 1.2 billion. Profitability is expected to remain hampered in the short term.

SpaceX has ample cash reserves, but massive free cash outflow cannot be ignored

SpaceX holds a large amount of money market funds, resulting in cash reserves of approximately USD 100 billion. This translates to a net cash balance of approximately 60.6 billion yuan against total liabilities of USD 39.5 billion (including finance leases). However, the debt structure warrants closer examination. Among the liabilities is approximately USD 13.4 billion in "other financing," which the quarterly report explains represents liabilities for AI infrastructure assets recorded under "non-sale-leaseback accounting" and "generally secured by specific machinery and equipment." This type of financing increased from USD 4.6 billion to USD 13.4 billion within six months, essentially representing secured debt with priority over unsecured notes. In other words, if future financing is secured or structured off-balance sheet, the relative repayment order for unsecured note holders may be diluted.

Furthermore, the group's operating cash flow for the first half of the year was USD 3.5 billion, capital expenditure reached USD 28.5 billion (of which AI accounted for USD 23.6 billion), and free cash outflow was approximately USD 25 billion. Quarterly capital expenditure increased from USD 10.1 to 18.4 billion, showing an accelerating trend. The group's operating cash flow only covers about 12% of its capital expenditures. Although management has emphasized that the existing funds are sufficient to support operations for at least the next 12 months and that it has reserved an additional USD 5 billion in unused credit facilities, investors should be aware of the huge cash drain generated by its business.

Bond Investments

While SpaceX has net cash, its quarterly report also revealed that two of its divisions are still operating at a loss and have negative free cash flow, indicating that its cash flow generation abilities are still uncertain. Therefore, we believe that investors should carefully weigh the yields of its bonds against the aforementioned risks taking into consideration their risk and maturity tolerance (see Table 1).

Table 1: SpaceX USD Bonds

Bond	Tenor	Net Ask YTM
SPCX 5.350% 15Jul2031 Corp (USD)	4.9	5.8%
SPCX 5.650% 15Jul2033 Corp (USD)	6.9	6.1%
SPCX 5.875% 15Jul2036 Corp (USD)	9.9	6.5%
SPCX 6.600% 15Jul2046 Corp (USD)	19.9	7.4%
SPCX 6.650% 15Jul2056 Corp (USD)	29.9	7.4%
Data Source: Bondsupermart Data As Of 1 September 2026

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

RISK DISCLOSURE STATEMENTS FOR BONDS

Key risks of investing in bond

Credit risk - bonds are subject to the risk of the issuer defaulting on its obligations. It should also be noted that credit ratings assigned by credit rating agencies do not guarantee the creditworthiness of the issuer; and
Liquidity risk - some bonds may not have active secondary markets and it would be difficult or impossible for investors to sell the bond before its maturity; and
Interest rate risk - bonds are more susceptible to fluctuations in interest rates and generally prices of bonds will fall when interest rates rise; and
Exchange rate risk - If the bond is denominated in a foreign currency, you face an exchange rate risk. Any fall in the foreign currency will reduce the amount you receive when you convert a payment of interest or principal back into your local currency; and
Event risk - A corporate event such as a merger or takeover may lower the credit rating of the bond issuer. In case the corporate restructurings are financed by the issuance of a large amount of new debt-burden, the company's ability to pay off existing bonds will be weakened.

Key risks of investing in high-yield bonds

Higher credit risk - since they are typically rated below investment grade or are unrated and as such are often subject to a higher risk of issuer default; and
Vulnerability to economic cycles - during economic downturns such bonds typically fall more in value than investment grade bonds as (i) investors become more risk averse and (ii) default risk rises.

Bonds with special features

Some bonds may contain special features and risks that warrant special attention. These include bonds:

That are perpetual in nature and interest pay-out depends on the viability of the issuer in the very long term;
That have subordinated ranking and in case of liquidation of the issuer, investors can only get back the principal after other senior creditors are paid;
That are callable and investors face reinvestment risk when the issuer exercises its right to redeem the bond before it matures;
That have variable and/or deferral of interest payment terms and investors would face uncertainty over the amount and time of the interest payments to be received;
That have extendable maturity dates and investors would not have a definite schedule of principal repayment;
That are convertible or exchangeable in nature and investors are subject to both equity and bond investment risk; and/or
That have contingent write down or loss absorption feature and the bond may be written-off fully or partially or converted to common stock on the occurrence of a trigger event.

Remarks

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