SpaceX (NASDAQ:SPCX) is reportedly engaged in high-level discussions with the U.S. Department of Defense regarding a data-center contract valued at several billion dollars, according to a report from The Wall Street Journal. The proposed project would provide critical infrastructure to support the military's artificial intelligence model operations, potentially marking a significant expansion of SpaceX's government business. However, sources caution that the talks are ongoing and could still collapse without a final agreement. Reuters has not independently verified the report.
The Pentagon discussions underscore a central challenge facing SpaceX: converting its massive investments in artificial intelligence into sustainable revenue. In the first quarter of 2026, the company's AI division accounted for 76.4% of its disclosed segment capital expenditures, yet contributed only 17.4% to consolidated revenue, according to calculations based on filings with the Securities and Exchange Commission. The gap between capital outlays and returns has widened over the past year, rising from 44.2 percentage points in 2025 to 59.0 percentage points in Q1 2026.
AI capital expenditure reached $7.723 billion during the March quarter, while the unit generated just $818 million in revenue and posted an operating loss of $2.469 billion. These figures highlight the financial pressure on SpaceX to secure high-value contracts that can improve utilization rates at its data centers. A Pentagon agreement would introduce a federal client alongside the private-sector deals the company has already signed, potentially boosting capacity usage and improving the unit's financial performance.
SpaceX has entered into two major third-party computing agreements that underscore its aggressive push into AI infrastructure. Anthropic has committed to monthly payments of $1.25 billion through May 2029, while Alphabet's Google (NASDAQ:GOOGL) has agreed to monthly payments of $920 million starting in October. These deals involve approximately 435,000 Nvidia (NASDAQ:NVDA) graphics processing units and related hardware. On an annualized basis, the total stated charges amount to $26.04 billion, a figure that is 39.4% greater than SpaceX's projected 2025 group revenue.
It is important to note that the $26.04 billion figure does not represent company guidance, and each contract includes a 90-day termination option following initial terms. In May, Chief Executive Elon Musk addressed the structure of the Anthropic agreement, stating: "The short term was our request, not Anthropic's." Additionally, Alphabet could reduce charges or withdraw if the September GPU deadline is not met, following a grace period.
Competition in the government AI infrastructure space is intensifying. Amazon (NASDAQ:AMZN) has committed as much as $50 billion to expand U.S. government AI capabilities. According to the Journal, SpaceX employees have discussed offering prices lower than those of rival CoreWeave (NASDAQ:CRWV). A Pentagon deal could provide SpaceX with a stable, long-term revenue stream that helps bridge the gap between its AI capital expenditures and revenue.
Despite the potential upside, SpaceX shares have faced headwinds. The stock closed Friday at $123.99, down 14.7% over the past week and 8.2% below its $135 initial public offering price. U.S. markets were yet to open at the time of reporting, with premarket trading active. The company has also set Thursday as the target for its upcoming Starship test following last week's aborted attempt.
Investors are closely watching the Pentagon negotiations as a potential catalyst for narrowing the capex-revenue gap. However, risks remain significant: the discussions may end without an agreement, and details on pricing, contract length, and committed capacity have not been disclosed. The numbers establish a clear threshold: SpaceX requires stable cash flow from assets that account for the majority of its disclosed segment capital expenditures.
