Tesla Stock Dips 3.3% Amid Flat Q3 Revenue and SpaceX Merger Wariness

Tesla (Nasdaq: TSLA) stock has tanked 3.32% in the after hours to trade at $373.65 following a mixed Q3 earnings call and skepticism over merger talks with aerospace company SpaceX.

Source: MarketWatch

Tesla Q3 2026 earnings report: financial metrics

The electric vehicle (EV) manufacturing company reported flat year-over-year revenue at $28.05 billion, missing Wall Street consensus of $28.3 billion to $28.13 billion.

Additionally, its net income fell 43% year-over-year to $787 million or $0.22 per share. This proved that heavy research and development (R&D) allocations to AI and robotics were significantly depressing profits.

Income was also affected by the loss of the $7,500 federal EV tax credits, causing sales to slump nearly 20% year-over-year. Tesla normally sells off these carbon credits at at least 100% profit since it doesn’t require that many.

Nonetheless, the adjusted earnings per share (EPS) reached $0.48 per share, beating the consensus of $0.44 to $0.45.

Even more, free cash flow reached $1.53 billion, dramatically exceeding Wall Street’s negative expectations of between -$4.5 and -$4.9 billion. Automotive gross margin also rebounded from 16.3% in the previous quarter to 18.1%.

Operational and strategic highlights

Tesla delivered 486,532 EVs in Q3, which beat Bloomberg estimates of 463,000, but represented a 2% year-over-year decline. The downscaling also represented the highest production backlog in four years, and was mainly attributed to battery supply constraints. 

Full Self-Driving (FSD) subscriptions increased by 20% in the quarter, and served 75% of new Tesla EVs in North America.

Capital expenditures (CapEx) fell to $4.73 billion, as compared to the previous quarter’s $5.8 billion. These funds were directed towards artificial intelligence (AI), robotics, the Cybercab robotaxi, and the Terafab chip plant being built in conjunction with SpaceX. The expense-cutting strategy also spanned its full-year CapEx guidance, with Tesla lowering estimates from $25 billion to $20 billion.

Tesla – SpaceX merger talks

On Tuesday, Tesla CEO Elon Musk confirmed that there were special committees exploring a potential merger between it and SpaceX. The deal would represent the largest corporate merger in history, but it requires a 50% vote from all Tesla shareholders.

Supporters say the tie-up would boost AI development since the companies would pool resources for a common product.

TSLA stock price

Other than the flat revenue and reduced EV production, TSLA shares also fell due to skepticism over the merger.

Investors fear it would dilute Tesla shares to fund the capital-intensive space firm.

Another concern is that Tesla would drag down SpaceX since the latter has better growth metrics. Critics also say it would drive attention away from Tesla, which desperately needs to work on its revenue.

Most importantly, investors are looking to history, noting that 70%-75% of large-scale mergers have usually eroded their combined market cap three years down the line.

Even more, Tesla heavily collaborates with Chinese manufacturers and this might pose national security issues or regulatory roadblocks when merging with the American space company.

Despite the mixed earnings call, the current analyst consensus rating is a Buy, with an average price target of $402.47 (+7.70% from today’s closing price of $386.47%).