Elon Musk's artificial intelligence venture, xAI, is accelerating its cash burn as it races to build advanced AI software and infrastructure, reporting a significant net loss for the September quarter. According to internal documents reviewed by Bloomberg, the startup's net loss widened to $1.46 billion in the third quarter of 2025, compared to a $1 billion loss in the previous quarter.
Rapid Cash Burn and Strategic Spending
The company's expenditure is scaling at a breathtaking pace. Financial records show that in the first nine months of 2025, xAI spent a staggering $7.8 billion in cash. This massive outflow is funding a multi-pronged strategy: constructing expansive data centers, engaging in a fierce war for top AI talent, and developing the core software intended to power future humanoid robots like Tesla's Optimus.
On a recent call with investors, xAI executives, including Chief Revenue Officer Jon Shulkin, outlined the company's immediate focus. They stated the core mission is to build AI agents and other software at high speed. These products will feed into a project internally referred to as "Macrohard"—a term Musk uses for a proposed AI-only software company—which will ultimately serve as the brain for robots like Optimus.
Revenue Growth Amid Mounting Losses
Despite the heavy losses, xAI is showing rapid revenue growth. Documents shared with investors reveal that the company's revenue nearly doubled quarter-over-quarter, reaching $107 million for the three months ending September 30, 2025. Gross profit also saw a sharp increase, jumping to $63 million in Q3 from just $14 million in the prior quarter.
However, the company's losses continue to outpace its earnings. Through September, xAI reported an EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $2.4 billion, exceeding its own full-year projection of a $2.2 billion loss. The firm acknowledged it may not meet its initial annual revenue target of $500 million, having reported just over $200 million in sales through the first nine months.
Funding the AI Ambition: Investors and Interconnections
To sustain its aggressive spending, xAI is continuously raising capital. The parent company, xAI Holdings, recently closed a massive $20 billion equity funding round from investors including Nvidia Corp., Valor Equity Partners, and the Qatar Investment Authority. This round valued the company at $230 billion. To date, xAI has raised at least $40 billion in equity.
The firm is also raising debt and has set up special purpose vehicles with partners like Valor and Apollo Global Management to purchase crucial Nvidia chips. A major focus of its infrastructure build-out is the Colossus data center site in Memphis, Tennessee, which Musk said is being expanded to reach a computing capacity of almost 2 gigawatts.
Musk's ecosystem of companies remains deeply intertwined. xAI's chatbot, Grok, is integrated into social network X and Tesla vehicles. SpaceX has invested in xAI, which in turn has spent hundreds of millions on Tesla's Megapack batteries. While a proposal for Tesla to directly invest in xAI failed to pass a shareholder vote in November, the automaker's board is considering next steps.
With new leadership, including CFO Anthony Armstrong, and billions in fresh capital, xAI executives signaled to investors they have the resources to continue their high-stakes race for AI supremacy, describing their growth phase as achieving "escape velocity." The company's ability to eventually turn its groundbreaking software ambitions into a profitable reality remains the critical question for its future.
