Tesla's Q3 Profit Falls 44% to USD 787 Million as SpaceX Merger Talks Emerge

Tesla reported a 44 per cent decline in net profit in the third quarter of 2026 compared with the same period last year, despite a sharp increase in cash generation, as the electric vehicle maker explores a possible merger with Elon Musk's aerospace company, SpaceX.

Tesla's net income fell to USD 787 million in the July-September 2026 quarter, from the year-earlier level, translating to earnings of 22 cents per share. However, adjusted earnings stood at 48 cents per share, beating Wall Street analysts' expectations by three cents.

Revenue remained largely flat at USD 28 billion, slightly below analysts' forecasts. The company generated USD 1.5 billion in free cash flow, surprising analysts who had expected heavy spending on artificial intelligence (AI) initiatives to weigh on its finances.

Morningstar analyst Seth Goldstein said the increase suggested Tesla was adopting a more capital-efficient approach by delaying longer-term projects to help finance its AI expansion.

The earnings come as Tesla and SpaceX explore a potential combination. Musk said during a SpaceX conference call that special committees had been established at both companies to discuss a possible merger, although significant hurdles remained. He declined to elaborate during Tesla's earnings call.

Tesla shares fell 2.4 per cent in after-hours trading after gaining 3.6 per cent during the regular session. The company also reported strong demand for its driver-assistance software, with 75 per cent of vehicles sold in North America including a subscription to Full Self-Driving (Supervised). The software requires drivers to remain attentive and ready to take control.

Tesla's automotive profit margins improved, with the company earning 18.1 cents for every dollar of car sales, nearly three cents higher than a year earlier. Meanwhile, capital expenditure doubled to USD 4.7 billion during the quarter.

Tesla lowered its full-year spending estimate to USD 20 billion from USD 25 billion and disclosed USD 30 billion in available borrowing capacity to finance major projects if required. The company had previously reported selling nearly 490,000 vehicles during the quarter, an increase from the preceding three months.