For a company valued at 63.4x its trailing 12-month revenues, the following items will not help the share price: 1H 2026 EBITDA margin of 26% is roughly flat with 1H 2025’s 25%. 1H operating loss of $2.1 billion is 2.2x that of 1H 2025. 1H 2026 net losses of $13.5 billion are 8.8x worse than 1H 2025. 1H 2026 cash burn of $25 billion is nearly 4x that of 1H 2025. SpaceX had its first earnings call last night after releasing Q2 results that beat estimates for revenues and EPS by 15% and 69%, respectively, but the stock sold off sharply in light of Q2 capex of $18.4 billion being 41% higher than expected. Musk has often sent Tesla shares diving in after-hours trading by saying stupid things, and he certainly didn’t hold back on SpaceX’s first earnings call, saying the worst thing possible amid market jitters over excess AI data center capacity.Capex for SpaceX’s moribund AI division made up 86% of total Q2 outlays, and Musk proclaimed that xAI would have compute capacity of nearly 10 GW by the end of 2027, or 7.1x Q2’s level of 1.4 GW. This amounts to a build-out of 8.6 GW of data center capacity, which would require roughly $450 billion of capex between now and the end of 2027. Consensus estimates saw SpaceX capex of $46 billion this year growing to $87 billion in 2027. Given that SpaceX’s AI division generated the bulk of the $25 billion in negative free cash flow (FCF) in 1H 2026 (3.8x that of 1H 2025’s cash burn), Musk’s comments were a gift to the legions of SpaceX short sellers (33% of the float is shorted at the moment). xAI, the Frankenstein of an AI division that Musk forced SpaceX to bail out, is a problem that won’t go away unless Musk admits that he simply was too late to the AI game, if not utterly incapable of using the huge resources he has amassed to catch up (read the section starting above Figure 5 in this report). Excluding xAI, SpaceX’s 1H operating margin of -17% would’ve been a positive 18%, while FCF as a percentage of sales would’ve been 25%, rather than -200% (see Figure 1). It should also be noted that $1.6 billion of SpaceX’s AI division revenues came from renting out its excess data center capacity, so if that were excluded, here’s how SpaceX’s Q2 earnings would’ve looked like: EBITDA of $3.2 billion would’ve been 50% lower. Operating losses of $2.1 billion would’ve been 77% worse. Figure 1: SpaceX With and Without its AI BusinessSource: SpaceX & MH estimates. Note: * indicates “xAI Excluded” net profit is calculated as 75% of operating profit, and that operating cash flow is calculated by adding back its AI division’s operating losses to consolidated operating cash flow.