Jornal Do Brasilia - Tesla profits drop on tech spending spree as 'Elon Inc.' talk builds

Besides marginally lower car sales, Tesla saw a drop in revenues from regulatory credits and energy and storage, while spending on research and development more than doubled as the company engages in a spending binge on AI, robotics and autonomous transport.

The earnings arguably upstaged Musk's disclosure Tuesday that special committees of independent directors at both SpaceX and Tesla have been set up to discuss a merger of the two companies. Musk, who leads both companies, declined to offer further details Wednesday.

The potential merger -- which some have dubbed "Elon Inc." -- boosted shares of both companies on Wednesday, lifting Musk's wealth back near $1 trillion at $989 billion, according to Forbes' real-time billionaires index.

In the third quarter, Tesla reported profits of $787 million, down 42.7 percent from the year-ago period. Revenues were essentially flat at $28 billion.

Analysts had been cautious about Tesla's latest results heading into Wednesday's release.

While third-quarter auto sales topped estimates, due in part to an uptick in European markets amid high gasoline prices, better sales have not always translated to Tesla's bottom line.

The company has faced questions about the rollout of Tesla's robotaxi venture that has progressed much more slowly than hoped.

Musk has repeatedly made overly rosy forecasts about self-driving technology, as in 2019 when predicted there would be more than a million robotaxis the following year.

In Texas, where Tesla has focused its robotaxi launch, there are currently about 800 robotaxis, according to FSD Database.

Tesla's release highlighted the September 3 launch of robotaxi service in Austin and said "cumulative unsupervised Robotaxi miles grew eightfold quarter over quarter."

Company officials said Wednesday that if the current pace of robotaxi growth continues, the venture could be meaningful financially as early as next year. The ramp-up is guided by a strong desire to avoid safety problems, company officials said.

For much of this year, Tesla has also encountered scrutiny over a steep increase in annual capital spending to $25 billion or more to fund ambitious programs in artificial intelligence, robotics and autonomous driving.

Capital spending more than doubled in the third quarter to $4.7 billion, although that was below the $7.8 billion expected by Wall Street analysts.

Besides robotaxi and AI, Tesla is heavily investing in Musk's "Optimus" humanoid robots as well as the buildout jointly with SpaceX of a large chip factory in Austin.

The chip factory, called Terafab, was the object of some of Musk's most effusive and self-boosting language on Wednesday.

"Terafab I think will be the most valuable building in the world, and and will probably have an economic value that will place it in the top 20 of countries," he said.

Musk is also eyeing auto growth, projecting production of five million in 2030 compared with 1.7 million in 2025.

"After many years of sort of grind and things being fairly flat, I think we're now headed for a lot of fun and significant growth," Musk said.

- Looming SpaceX merger? -

But questions about Tesla's future loomed larger with talk of the potential SpaceX tie-up. The companies have a combined equity value of more than $3.5 trillion.

"We think it's a matter of when, not if" the two companies combine, said CFRA Research equity analyst Garrett Nelson.

"That's the whole issue," Nelson said of a potential mega-deal. "Tesla as we know it today may not exist in six to 12 months."

On SpaceX's conference call Tuesday night, Musk said the committees have not agreed on the terms of any deal and there is no guarantee they will.

Musk said the two companies could gain from working together on AI software, chip design, robotics and space-based computing.

Talk of the deal heaps additional attention on Musk as the billionaire's latest cash infusion into US political elections fuels fresh criticism. Musk has steered at least $276 million to allies of President Donald Trump in the Republican party.

Musk is also under scrutiny over a report he ordered a reduction in Starshield telecom services for Ukraine, adding to pressure on the country at the same time Trump has criticized Ukrainian President Volodymyr Zelensky and called for him to be replaced.

Shares of Tesla initially rose in after-hours trading, but were down 2.8 percent near 2250 GMT.

F. Tavares--JDB