While the tie-up has been on investors’ minds since before SpaceX went public in June, the financial and regulatory mechanics of a merger remain murky. Without those details, it’s difficult to discern how much Tesla stands to benefit. Shares rose less than 2% in extended trading after Musk’s comments on Tuesday.
The relatively muted response shows that the merger prospect has been largely priced in, according to Nicholas Colas, co-founder of DataTrek Research.
“You can’t play games around a merger that would make a company worth US$3 trillion [$5.2 trillion],” Colas said. Tesla’s earnings report “will be less relevant than how they describe the progress of the overall business. It needs to be consistent with SpaceX, so the combined company feels like an organic whole”.
Chatter around the potential combination has crescendoed in recent weeks after a gravity-defying vehicle demonstration highlighted the engineering synergies between Tesla and SpaceX.
On Tesla’s last earnings call in July, Musk said that “there’s more and more overlap” between the businesses. At the time, his expansive spending goals sent Tesla’s stock tumbling, slicing off a fifth of the company’s market value in just five days. But Tesla’s share price has rebounded since then to trade around the same levels it did before the rout.
Progress in the merger talks is likely to beat any updates on Tesla’s AI efforts. The company’s self-driving Cybercab has hit the streets and a limited pilot programme of its Optimus robot is on the assembly line. But proof that the ventures can generate and sustain revenue is quarters away, according to Mazza.
But the focus on future growth potential has come with atrophying expectations for near-term execution. Annual profit estimates for 2026 have sunk almost 30% since this time last year, when AI aspirations were powering a rally in shares.
The Austin-based firm is estimated to report third-quarter earnings of 44 cents per share, a 12% drop from the year-ago quarter, according to Bloomberg consensus estimates. Capital expenditure is expected to balloon by more than 250%, and investors and analysts are eyeing free cash flow and margins to assess whether the company is doing enough to offset its massive spending.
Tesla shares have slumped the day after earnings for the past three quarters in a row. If the stock closes lower on Thursday, it will be the second time since at least 2015 that traders have sold the news on four consecutive reports.
Vikram Rai, portfolio manager and macro trader at First New York, said the same future hopes that restrict Tesla’s gains are also keeping the stock from falling. He sees it stuck in a roughly US$425 to US$350 trading range.
“The merger talk gives the stock a floor and the slow pace of robotaxi and Optimus monetisation gives it a ceiling, which is why Tesla has spent most of this year trading in a range instead of trending,” Roundhill’s Mazza said.
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