Preview - As merger rumors intensify, the earnings reports of SpaceX and Tesla will test Musk’s ambitions for investment in artificial intelligence

Akash Sriram

Reuters, October 19 - SpaceX (SPCX.O) and Tesla (TSLA.O) are set to release their third-quarter financial reports on back-to-back days this week, providing investors with a rare opportunity to compare two of Elon Musk’s highest-valued companies side-by-side amid rising merger speculation.

These earnings will test whether Starlink’s robust growth and Tesla’s automotive profits are sufficient to support the AI spending that has fueled merger discussions.

“From a metrics perspective, investors should focus on Starlink’s revenue growth (rather than the number of launches), and improvements in Tesla’s automotive profit margins,” said Shawn Campbell, adviser at Camelthorn Investments. He owns shares in both companies and described these as key investor focus areas for the reports.

Barclays noted last week that a deal could be announced before Tesla’s annual shareholder meeting, with SpaceX more likely to be the acquirer, although neither company nor Musk has made a formal statement supporting such a transaction.

Tesla said on Monday its annual shareholder meeting will be held on December 3.

Barclays estimates that, in an all-stock deal, Musk would own approximately 37% equity and 56% of voting rights.

“A SpaceX acquisition of Tesla would be simpler, as that would allow the China business to be treated as a separately disposed asset, making divestiture easier,” Campbell said.

On Thursday, Tesla provided a perfect showcase for the speculation: at a SpaceX test site in Texas, the company unveiled its new Roadster sports car (link), scheduled for production in 2028, able to leap and flip in midair using rocket technology.

“Musk is integrating automotive and rocket technology to shape the future of mobility; at least, he’s cleverly planting a seed in investors’ minds, providing an engineering efficiencies argument for a merger,” said Bill Birmingham, head of research at REX Financial.

He noted that releasing this news right before Tesla’s annual meeting was no coincidence.

SpaceX absorbed Musk’s xAI in February, several months before its planned initial public offering (IPO) in June; and both Tesla and SpaceX’s spending is now pointed toward one area: artificial intelligence.

Their businesses remain different: SpaceX’s revenue sources include rocket launches, Starlink, and AI computing, while Tesla’s come from auto and energy storage operations.

SpaceX will report earnings on Tuesday; Tesla will follow after the close on Wednesday.

SpaceX: AI Spending in the Spotlight

This is SpaceX’s second report as a publicly listed company, and investors are closely watching to see if surging AI spending has translated to revenues.

Data compiled by London Stock Exchange Group (LSEG) forecasts the company will report Q3 revenues of about $12.74 billion and earnings per share of $0.14, just four months after its listing.

By comparison, Q2 revenue was $7.8 billion, with a net loss of $541 million, and $15.8 billion of AI capital expenditure.

Evercore ISI expects the annual revenue run rate at SpaceX to reach approximately $104 billion by the end of 2026, driven primarily by its AI business, and expects 2027 capital expenditures to hit around $151 billion.

Connectivity revenue, including Starlink, rose 66% in Q2 to $4.3 billion.

On October 8, SpaceX also agreed to buy 800 MHz spectrum from Grain Management for about $8 billion (link), a deal pending approval by the FCC, that will support its rollout of “Starlink Mobile.”

At Friday’s close, the stock was at $146.03, above its $135 IPO price, but well off its post-listing peak.

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Tesla: Robotaxi and Long-Term Strategies

Tesla is on track to achieve delivery growth for the first time since 2023, but investors are more focused on profitability and the company’s push into the robotaxi sector.

Analysts expect Tesla to report adjusted EPS of about $0.43 and revenue of roughly $27.88 billion, compared with $0.50 a share a year earlier.

Second quarter profit fell well short of expectations, and free cash flow was negative $1.1 billion — the first negative value in over two years.

Nevertheless, Tesla delivered 486,532 vehicles in Q3 (link), beating analysts’ forecasts.

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Tesla previously said capital expenditures for this year would exceed $25 billion, and its share price is down roughly 17% in 2026, as analysts expect third-quarter free cash flow to be negative $4.92 billion.

Still, Wall Street’s growth thesis for the company centers on robotaxi and Optimus humanoid robots, seeing these high-margin product lines as potentially overshadowing traditional auto sales.

Although Tesla’s robotaxi business and fleet size are still small compared to Waymo, the company is expected to scale up robotaxi deployments massively in the coming years.

Its valuation depends largely on these long-term goals rather than the automotive business, which currently makes up the bulk of revenue.

(For the convenience of non-English speakers, Reuters has automated the translation of this report into several other languages. Because automated translation may contain errors, or may lack the required context, Reuters does not guarantee the accuracy of automated translation and provides it solely for readers’ convenience. Reuters accepts no responsibility for any damage or loss caused by the use of automated translation.)