Tesla reported better-than-expected third-quarter results after the bell on Wednesday, even as automotive revenue dropped. The stock rose slightly in extended trading.
Here’s how the company did, compared with estimates from analysts polled by LSEG:
- Earnings per share: 48 cents adjusted vs. 43 cents estimated
- Revenue: $28.05 billion vs. $27.9 billion estimated
Tesla’s earnings report lands a day after CEO Elon Musk told investors on SpaceX’s quarterly call that it would be a “good idea” for his two companies to merge, and said the boards at both have formed special committees to discuss a possible tie-up.
“I feel like I’m tap dancing through a minefield,” Musk said on the call, responding to a question about a potential merger.
“Do I think it would be a good idea? Yes,” Musk said. “But at the end of the day, the shareholders have to be supportive of this.” On the Tesla side, that means needing a 50% vote of all shares, which is “quite a high hurdle,” he said.
Revenue was down slightly flat from a year earlier, when the company generated sales of $28.24 billion, Tesla said in its earnings deck. In Tesla’s core automotive business, revenue declined 3% from a year earlier to $20.56 billion in the quarter. Energy revenue fell 16% to $2.88 billion.
Balancing out the declines were gains in Tesla’s services and other revenue. Sales there climbed 33% from a year ago to $4.61 billion.
Net income attributable to common share holders plummeted 29% to $787 million, or 22 cents a share, from $1.11 billion, or 32 cents a year earlier, Tesla said.
The drop in profitability reflects a surge in spending on robotics and artificial intelligence initiatives. Capital expenditures more than doubled from a year earlier to $3.73 billion. Free cash flow plunged by 62% year over year to $1.53 billion, after Tesla turned free cash flow negative in the second quarter.
Tesla said uptake of its FSD (Supervised), a partially automated driving system the company sells for $99 per month in the U.S., grew by 20 percentage points from the second quarter. Active FSD subscriptions increased 67% from a year earlier to 1.74 million.
“We believe that FSD is driving demand in markets where it is available, and we continue to work with regulators to get it approved in other markets,” the company said in its investor deck.
Tesla said its auto sales in Canada, Japan, Taiwan and Australia hit new records during the quarter. However, the company has gotten meager growth out of its core market of late as Chinese EV makers such as BYD and Xiaomi gained popularity in Asia and Europe with affordable and innovative EVs. Tesla was also hit last year by the end of a federal EV tax credit.
Earlier this month, Tesla reported vehicle deliveries for the third quarter of 486,532, about 2% below the year-ago number. Deliveries are the closest approximation of sales reported by Tesla but are not precisely defined in its shareholder communications.
One of Tesla’s big investments is in a semiconductor factory that it’s building with SpaceX and Intel in Grimes County, Texas. That partnership with SpaceX along with other areas of overlap, including work on Tesla’s recently announced Roadster refresh, fueled intensifying speculation that Musk’s companies were on the verge of combining in what would be a historic transaction.
Tesla executives will update investors on a conference call at 5:30 p.m. ET.
