Last night was marked by two major earnings reports:
Both companies are shifting huge sums into AI, and investors are mainly asking how much it will cost.
$META had free cash flow of minus $2.12 billion
$TSLA, which analysts expected to burn nearly $5 billion, generated plus $1.53 billion.
Meta: Revenue rose 26% to $64.6 billion, beating estimates of $63.4 billion. Growth is coming from both pillars: ad impressions increased by 10% and the average price per ad by 14%.
AI in its algorithms is clearly increasing the value of ads for advertisers. Operating margin fell from 40% to 20%, though, mainly due to a one-time charge of $9.89 billion to settle disputes over social media’s impact on teenagers. Without it, earnings per share would have been $7.40 instead of the reported $3.83.
The main topic is capex. Meta spent $34.9 billion during the quarter, narrowed its 2026 outlook to $135–145 billion, and the market expects around $193 billion in 2027.
Debt has risen from $58.7 billion to $80.9 billion since the start of the year, and buybacks have stopped. The company also announced new Class C shares, which it intends to use, among other things, to raise capital. It expects fourth-quarter revenue of $73–76 billion, above consensus.
Tesla: margins are improving. Revenue was unchanged at $28.05 billion compared with last year. Earnings per share of $0.48 beat the estimate of $0.44.
The positive surprise came in margins: automotive margin excluding regulatory credits jumped to 18.1% from 16.3% in the second quarter.
Operating profit nevertheless fell 56% to $718 million, as research and development expenses rose 69% to $2.76 billion. The money is going to Optimus, Cybercab, and AI computing capacity, and full-year capex is expected to exceed $25 billion, compared with roughly $8.5 billion last year.
Active FSD subscriptions stand at 1.74 million, up 67%. Energy, on the other hand, disappointed, with revenue down 16%. Musk is further fueling speculation about a merger with SpaceX, where both companies have already established special committees of independent board members.
More on the results and stocks on the stream at 19:00!