Tesla Free Cash Flow Plunges 62% and SpaceX Posts First Profit as Musk Floats Merger Idea, Dragging Nasdaq Down 1.5%

SpaceX reported its first operating profit as a public company, with revenue surging 161% to $14.6 billion in the third quarter. Artificial intelligence revenue nearly tripled to $7.6 billion, surpassing Starlink for the first time, and CEO Elon Musk guided Q1 2027 revenue at $33 billion to $37 billion, far above the Wall Street consensus of $22.2 billion. Shares rose roughly 7.8% in extended trading.

On the same evening, Musk said a merger between SpaceX and Tesla would be a good idea, and both companies confirmed they had formed special committees to discuss the possibility. Tesla shares initially lifted on the news but reversed sharply after the company released its own quarterly results.

Tesla beat top- and bottom-line estimates for the third quarter but delivered a mixed picture underneath. Automotive revenue fell 3% year over year, energy revenue declined, and free cash flow plunged 62% year over year to $1.53 billion. Automotive gross margins, excluding credits, improved sequentially from 16.3% to 18.1%, attributed to a higher delivery mix in Asia-Pacific. Tesla ended the quarter with more than $45 billion in cash and investments and revised its capital expenditure guidance to approximately $20 billion for the full year.

Meta Platforms also reported after the close, beating third-quarter revenue estimates with $64.6 billion, a 26% year-over-year gain. The company guided fourth-quarter revenue to $73 billion to $76 billion, above consensus. Capital expenditure reached $34.9 billion in the quarter, up 80% year over year, with full-year 2026 CapEx now guided at $135 billion to $145 billion. Meta also announced a new class of non-voting Class C shares tied to a 2-for-1 stock split taking effect in January. The stock rose about 2.5% in after-hours trading but the AI spending scale renewed investor concern about returns across the sector.

The combined weight of Tesla's weakness and renewed anxiety over AI investment economics pushed futures sharply lower. At the open on Thursday, the Nasdaq fell 412 points, or 1.55%, to 26,290; the S&P 500 dropped 71 points, or 0.92%, to 7,685; and the Dow lost 230 points, or 0.44%, to 52,625. Chip stocks bore the brunt: AMD fell 6.64% and Intel dropped 6.17% in morning trading. AT&T slid about 6.5% despite beating revenue and profit estimates, as investors weighed the threat of SpaceX entering the wireless spectrum and connectivity market. Super Micro Computer bucked the trend, jumping roughly 9.5% after forecasting quarterly revenue and margins above expectations. Spotify rose 8.6% after guiding fourth-quarter operating income ahead of Wall Street estimates.