SpaceX outperforms in debut earnings

0:02Good morning from the Financial Times. Today is Wednesday, August 5th, and this is your FT News briefing. SpaceX outperforms in its first ever earnings report, and China wants its wealthiest citizens to pay taxes from decades ago. Plus, Tunisians are outraged over rolling blackouts during an extreme heat wave. We've seen people angry that their lives are being disrupted because these kinds of power cuts are unprecedented in Tunisia. I'm Victoria Craig, and here's the news you need to start your day.

0:49SpaceX shares slid in volatile after-hours trade on Tuesday despite results that beat the street. Elon Musk's rocket company said quarterly revenue jumped 92 % from a year ago. It also posted a net loss of about$541 million. But that was better than the more than$2 billion estimated loss. The numbers are a first from SpaceX. It made its stock market debut in June after a record-breaking initial public offering that crowned Elon Musk the world's first trillionaire. Rafe Rosner-Oden has been listening to the earnings call for us out in San Francisco. He joins me now to chat through these results.

1:25Hi, Rafe. Hi, Victoria. So growth looked to be accelerating across all of SpaceX's business segments. what is disappointing investors with these results? What has seemingly taken investors either by surprise or maybe underwhelmed them is that despite a massive ramp up in capital expenditure for the company's AI arm, XAI, about$15.8 billion of the$18 or so billion that they've spent in the quarter was spent effectively on data centers. What most of the compute that the company seems to be building is being directed towards other companies, mainly Amphropik and Google, but not SpaceX's own AI venture.

2:11And what that means for the company's AI efforts and whether it's struggling and continuing to struggle there is going to, I think, be a persistent theme over the coming quarters. It also seems, judging from these results, Rafe, that a lot of the company's performance really hinges on Starlink. That's its satellite network. Do you think investors are undervaluing the potential of that for SpaceX? I mean, Musk certainly thinks so. I think he spent a good portion of the earnings call talking about how it's hard for people to wrap their heads around this business unit's potential. It's obviously driving more than half of the company's revenues.

2:50It's the only profitable part of the business. And it's certainly the part of the business that leads in its own market. There are few competitors to Starlink. So we've got smaller competitors like Utelsat, and then Amazon is attempting to build up a constellation that would be able to offer satellite internet as well. But nobody has as many satellites up in space as SpaceX do. If we look at SpaceX on the market on the whole, shares of the company have dropped about 20 % since their debut. I just wonder, has cooling investor sentiment been a source of concern, or will it be a concern for Elon Musk going forward?

3:28So SpaceX at their IPO raised a record amount, about$86 billion. And the shares have slid dramatically since. A lot of that sentiment is being driven by fear that come Thursday, when a lockup period for employees ends, there's going to be a period of selling that's going to further dent the share price. There's also uncertainty about this business. The AI arm has been completely overhauled. A number of key hires or XAI's co-founders have all but left the business. Musk has spoken about how it needs to be reinvigorated, effectively starting from scratch in a race where lots of competitors, whether it's OpenAI or Anthropic or Alphabet, are racing ahead.

4:13So the shares are down quite dramatically. And there are lots of problems within SpaceX's business, particularly on the AI side, that are further denting that. So investors, Rafe, clearly disappointed. But what would make them happier in the coming quarters? So one of the things that we saw going into big tech posting earnings this course, it was fear that lots of the investment that hyperscalers, so Microsoft, Alphabet and Amazon were making, wasn't turning into significant revenue growth. And at the print, we started to see some of that feed through. It's not showing up in SpaceX's numbers just yet.

4:52And I think that's leading to investors growing slightly more concerned. And if they can't demonstrate that in future quarters, it's going to continue to weigh on the company's share price. Plenty for you to keep your eyes on, Ray Frosner-Udin, the FT's San Francisco correspondent. Thanks so much for your time. Thanks again.

5:16China is on the hunt for hundreds of billions of dollars in unpaid taxes. And to find it, Beijing is targeting the ultra-rich. The government wants to use the funds to help dig itself out of a fiscal hole. Authorities are stepping up scrutiny and control of money made overseas. They're looking at things like real estate equities and offshore trusts going back more than 25 years. That is according to multiple officials, bankers, and advisors. China's budget revenue largely depends on tax, and it's mostly plateaued since the pandemic. But one Asia-based lawyer told the FT that a handful of his wealthy Chinese clients are already planning to leave the country.

5:56The state taxation administration, meanwhile, did not respond to a request for comment.

6:07Thousands of Tunisians have taken to the streets in protest in recent weeks.

6:16They're angry about rolling power cuts during a recent severe heat wave. Temperatures soared as high as 45 degrees Celsius, which is about 113 degrees Fahrenheit. The government has suggested the power cuts are a result of sabotage, but the protests are making one thing quite clear among the public. Many Tunisians are disenchanted with their president, Kay Said. The FT's Hebe Sala has been following events on the ground, and she joins me now to discuss. Hi, Hebe. Hi, Victoria. So tell me about these protests. What's been going on? In the last couple of weeks, there has been a heat wave in Tunisia, and because it was exceptionally severe, the electricity company introduced rolling blackouts to protect the grid from collapse.

7:07But the blackouts, which lasted for several hours, for several days in many places, provoked popular anger. And we've seen people angry that they don't have power, angry that their lives are being disrupted because these kinds of power cuts are unprecedented in Tunisia. Okay, so these protests have sort of underscored a real change in public sentiment toward President Saeed. And just for a brief bit of background for our listeners, he was really popular among Tunisians when he was elected in 2019, which was after a chaotic decade of democratic transition for the country. So, Heba, what was it that people had hoped that he would do when they elected him?

7:53So, Saeed presented himself as someone who would fight corruption. But two years after taking office, he conducted what many Tunisians call a coup against democracy. He shuttered parliament, suspended the constitution, and then set about reconstructing the political system to concentrate all powers in his hands. The remarkable thing is that when he took these measures in 2021, Tunisians welcomed them. They experienced the democratic decade as a nightmare of political chaos and plummeting living standards and economic drift. And Said presented himself as the man who had to take these measures to provide the country with good government.

8:45So he really was warmly welcomed. So Tunisians welcomed his crackdown if it meant that their economic well-being would get better. Now we know, obviously, social services like electricity are struggling. But what about the wider economy? The economy has not improved. Growth remains weak to moderate. Unemployment still hovers around 15%. And in 2023, there was a long-awaited IMF loan of$1.9 billion, but Khay Saeed rejected it, said that he will not submit to foreign diktats about how to run the country. As a result, Tunisia has no access to external borrowing. It has only three months worth of foreign currency reserves, which is probably one of the reasons behind the electricity crisis.

9:43People who study the Tunisian economy say that a combination of underinvestment in the grid plus limited means to import more gas from Algeria are the reason that people had to experience these very long power cuts, which, of course, have stoked anger. And given that anger, Habba, what is likely to happen from here? What can we expect? I think it is too early to speak about a popular explosion or an uprising. But what appears to have happened is a change of sentiment towards Saeed, a sense of disappointment that there has been no improvement in their lives. Localized protests have become more frequent over the past two years.

10:37How this will take shape? Will the resentment increase? I think we don't know yet what will happen. Heba Sala covers North Africa for the FT from Cairo. Thanks, Heba, for your time. Really appreciate it. Thank you, Victoria.

10:58Before we go, one more story to tell you about. The cost to buy diesel fuel during U.S. President Donald Trump's second term has surpassed the average during Joe Biden's time in office. Diesel is the lifeblood of the American economy because of the critical role it plays in industries like agriculture and transport. The figures crunched by the FT show the added pressure that Trump is facing as voters grow increasingly frustrated with high energy prices ahead of the November midterm elections. Be sure to tune in tomorrow because we're going to be looking at how those crucial elections are shaping up as the primary season here is winding down.

11:39You can read more on this story and all of the others in today's podcast for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news. Thank you. The Capital Markets Podcast explores how corporates and investors are navigating new pathways to raise capital, create value, and drive growth. When conditions change, alternatives matter. Listen to Strategic Alternatives, available wherever you get your podcasts. From globalization to innovation, sustainability to market volatility, there's always more than one side to a story.

12:44explore different perspectives on today's most important business and economic issues with the flip side podcast from barclays investment bank hear two research analysts in a lively debate and get insights from every angle to further inform your view listen to the flip side on your favorite platform