Tesla reported a sharp fall in third-quarter net income on 22 October 2026, posting a profit of $787 million — a 44% decline from the same period a year earlier — even as revenue held largely flat at $28 billion. The mixed results underline the mounting cost pressures facing the world's most valuable electric vehicle maker.

Key Financial Figures

Despite the profit slump, Tesla's free cash flow climbed to $1.5 billion during the quarter, offering some reassurance to investors watching liquidity. Capital expenditure nearly doubled to $4.7 billion, reflecting continued investment in new technologies, products, and expanded manufacturing capabilities. The jump in capex signals that the company is betting heavily on future growth even as near-term margins remain under pressure.

SpaceX Merger Talks Surface

Adding an extraordinary dimension to the earnings season, Elon Musk — who leads both Tesla and SpaceX — confirmed during SpaceX's earnings call that special committees had been established at both companies to evaluate a potential merger between the two firms. Musk described such a transaction as a 'potentially attractive idea' but cautioned that significant hurdles remained before any deal could advance. Notably, he declined to elaborate on the proposal during Tesla's own earnings call, leaving investors with limited detail on the timeline or structure of any possible transaction.

The Roadster Spectacle in Texas

The earnings report arrives weeks after Tesla unveiled a revamped version of its long-delayed Roadster sports car at a SpaceX facility in Texas. During the demonstration, a prototype vehicle travelled along an elevated curved track before briefly lifting off the ground and landing safely — a spectacle that drew widespread comparisons with flying-car concepts and underscored the increasingly blurred line between Tesla's automotive ambitions and SpaceX's aerospace capabilities.

SpaceX's Breakout Quarter

While Tesla's numbers disappointed, SpaceX delivered a standout quarter, with revenue surging 161% year-on-year to $14.58 billion. Musk struck an optimistic tone on SpaceX's long-term outlook, suggesting annual recurring revenue could eventually reach as high as $1 trillion, driven by expanding demand for artificial intelligence-related infrastructure. 'As crazy as this sounds, $1T in SpaceX revenue in 2028 is no longer impossible,' Musk wrote in a post on X. If a merger were to proceed, the combined entity's revenue trajectory would represent one of the most consequential corporate combinations in technology history.

What to Watch Next

Investors and analysts will now focus on whether Tesla's capex-heavy strategy translates into margin recovery in the quarters ahead, and on any formal updates from the special committees reviewing the SpaceX-Tesla merger proposal. The contrasting financial profiles of the two companies — Tesla's compressed margins versus SpaceX's explosive revenue growth — will be central to how any deal terms are structured.