Shares edged higher as investors weighed two colliding storylines: Elon Musk's most forceful public endorsement yet of combining Tesla with SpaceX, and a quarterly earnings report that showed a company spending more, earning less, and pulling back on its own investment plans.
Musk Wants the Biggest Merger in History — but Can't Steer It Himself
On SpaceX's Q3 earnings call, Musk said he thinks merging the company with Tesla would be a "good idea" and revealed both companies have formed special committees of independent directors to study a deal.
As a "conflicted party," Musk said he cannot be part of the committee discussions.
On the Tesla side, approval requires a 50% vote of all shares — not just those cast — which Musk called "quite a high hurdle."
Reuters reported that Musk's public endorsement has already unsettled people close to the discussions, who worry his comments could invite shareholder scrutiny and push the process back by several weeks. The deal would create a roughly $3.5 trillion entity, but the governance tightrope is immense.
Revenue Is Flat, Profits Are Shrinking, and the Capex Bill Just Got Smaller
Tesla reported Q3 revenue of $28.05 billion, roughly flat year-over-year, after delivering 486,532 vehicles.
Operating profit dropped 56% to $718 million, with the company citing higher R&D and operating expenses, reduced regulatory credit income, and narrower energy margins — operating expenses rose 39%.
CFO Vaibhav Taneja framed the capex cut — from over $25 billion to roughly $20 billion — as "disciplined capital allocation" funded primarily from operating cash flows. For investors, less spending can preserve cash but also signals a slower buildout of factories and AI infrastructure at a moment when competitors are accelerating.
The Bright Spots Are Real but Narrow
Adjusted earnings per share of $0.48 exceeded the market expectation of $0.43.
Gross profit rose 9% to $5.5 billion, with the overall gross margin rebounding to 19.6% from 16.8% last quarter.
Services revenue jumped 33% to $4.6 billion , showing Tesla's software and maintenance businesses are growing even as vehicle sales dip. Still, free cash flow fell 62% year-over-year to $1.5 billion , underscoring how thin the cushion is.
What Investors Are Really Pricing In
Deepwater's Gene Munster said he sees a 95% chance a Tesla–SpaceX deal happens within two years. The stock's modest +1.1% move suggests the market is intrigued but cautious: a mega-merger promise layered on top of deteriorating operating profits and a capex retreat is a cocktail of excitement and uncertainty that could take quarters to resolve.