Tesla Q3 Earnings Beat on Cash Flow as Capex Cut and SpaceX Merger Talks Sink Stock 4%

Tesla reported third-quarter revenue of $28.05 billion, roughly flat year over year and slightly below consensus, while adjusted earnings per share of $0.48 beat the $0.43-$0.45 estimate. The headline surprise was free cash flow: Wall Street had expected Tesla to burn approximately $5 billion, but the company instead generated $1.5 billion. GAAP net income fell 43% and operating profit dropped 56% as costs rose, and the company cut its full-year capital expenditure guidance to roughly $20 billion from a prior forecast of more than $25 billion, a reduction of about one-fifth.

The capex cut triggered the sharpest investor reaction. Tesla shares closed the regular session up 3.4% at $386.47 on the initial earnings beat, then reversed to fall 3 to 5% in after-hours and premarket trading as investors questioned whether reduced spending signals a slowdown in AI, robotics, and autonomous driving investment. Bitcoin added a side note: Tesla held 11,509 BTC valued at $962 million on its balance sheet, up 42% quarter over quarter, recording $288 million in unrealized gains without selling a single coin.

The bigger story overshadowing the numbers was the potential merger between Tesla and SpaceX. Both companies confirmed they have formed special committees to study a combination that analysts value at roughly $3.5 to $3.7 trillion at current prices, which would be the largest corporate merger on record. Musk said on Tesla's earnings call the deal has "a lot of merit" but offered no timeline or structure. Reuters reported the deal is intended to close before the end of President Trump's term. Sources told Reuters that Musk's public endorsement rattled insiders involved in the discussions, who worry it could invite shareholder scrutiny and delay the process by several weeks. Analysts flagged China as a significant regulatory hurdle, with a merged entity likely facing objections from regulators on both sides of the Pacific over national security and data-sharing concerns.

On autonomy, Tesla said unsupervised Full Self-Driving for personal vehicles is coming in 2027, not sooner. The Cybercab robotaxi fleet has expanded tenfold in a month and Tesla aims to put Cybercabs in customers' hands by year-end despite an ongoing federal probe. Musk announced an "Optimus Academy" where humanoid robots will practice real-world tasks, with Optimus deliveries targeting 2027. SpaceX separately reported Q3 revenue of $14.6 billion, up 161% year over year, marking its first profit as a public company.

Analysts broadly raised price targets after the print. Piper Sandler moved to $475 from $450, UBS to $425 from $391, Morgan Stanley to $410 from $400, and JPMorgan to $430 from $415. Goldman Sachs reiterated Neutral at $360, flagging two factors likely to pressure profitability. CLSA upgraded Tesla from Underperform to Hold with a $400 target. Tesla and Nvidia were also reported to be jointly investing $2.8 billion in a Samsung Electro-Mechanics chip substrate plant, according to Korean outlet Maeil, a move Reuters corroborated.