A $3.7 trillion mega-merger? Musk: 'Good idea'

Moreover, SpaceX completed its acquisition of AI programming company Cursor on August 14. As of the end of September—just one and a half months later—Cursor contributed $608 million in revenue. The gradual conversion of cloud service contracts, Cursor’s consolidation into SpaceX’s financial statements, and Grok’s user growth collectively drove an explosive expansion in AI-related revenue. However, generating the highest revenue does not necessarily mean contributing the most profit. SpaceX’s original cash cow—Starlink—remains exceptionally strong. In Q3, connectivity services—including Starlink—generated $5.248 billion in revenue, up 69% year-on-year. As of end-September, Starlink consumer subscribers reached 13.6 million, an increase of 1.6 million from the prior quarter. Operating profit for this segment totaled $2.367 billion—nearly doubling year-on-year. By comparison, while the Superintelligence business generated higher revenue, its operating profit was only $431 million. Although it reversed Q2’s $1.257 billion operating loss, it still lags significantly behind Starlink. As for SpaceX’s traditional aerospace business, it conducted 35 launches in Q3, generating $1.767 billion in revenue—a 6% increase year-on-year—but posted an operating loss of approximately $7 million. Meanwhile, Starship made progress: its 14th flight—the first to reach orbit—successfully deployed 26 next-generation Starlink V3 satellites. SpaceX dubbed this Starship’s first commercially revenue-generating mission. Viewed together, AI is emerging as SpaceX’s largest growth engine; Starlink continues to shoulder the primary profit-making responsibility; and rocket operations sustain the entire ecosystem’s infrastructure. Yet for Musk, these three businesses clearly aren’t the finish line. Now, he is seriously considering integrating Tesla into the fold. B Even before SpaceX released its earnings report, investors began probing the feasibility of a merger between the two companies. According to foreign media reports, among shareholder questions pre-collected by SpaceX, those concerning a Tesla merger ranked second in terms of support votes. Musk’s remarks during the earnings call indicate the matter has already advanced to a substantive stage. At shareholders’ request, both companies have established special committees. However, because Musk serves as CEO of both SpaceX and Tesla—and holds substantial equity stakes in both—there exists a clear conflict of interest, disqualifying him from participating directly in the committee’s deliberations. Musk even joked that it resembles a strange kabuki performance: two groups debate the deal while he himself cannot join. (Image generated by AI) Still, he cautioned observers not to assume the merger is a done deal. To date, neither committee has agreed on any transaction terms. Even if negotiations yield an agreement, shareholder approval—especially Tesla’s—is required. Per Musk, the merger would need approval from shareholders representing at least 50% of all outstanding shares—not merely a majority of votes cast. This is no easy hurdle to clear.

Tesla’s Q3 net income fell 43% year-on-year. What were the main contributing factors?

In other words: patience is still required. Gross margin rose—but profits plunged by 40% First, key financial figures for the quarter: ・Total revenue: $28.046 billion, versus $28.095 billion a year ago—essentially flat year-on-year; ・Automotive revenue: $20.56 billion, down 3% year-on-year; energy storage revenue: $2.881 billion, down 16%; services and other revenue: $4.605 billion, up 33%; ・Overall gross margin: 19.6%, versus 18.0% a year ago and 16.8% last quarter; ・Operating profit: $718 million, down 56% year-on-year; operating margin: 2.6%; ・GAAP net income attributable to common shareholders: $787 million, down 43% year-on-year; non-GAAP net income attributable to common shareholders: $1.697 billion, down 4%; ・GAAP diluted EPS: $0.22; adjusted EPS: $0.48—versus LSEG-compiled analyst consensus of $0.43. Gross profit totaled $5.494 billion, up 9% year-on-year—meaning Tesla earned more money from selling goods. Yet profits declined, primarily due to surging expenses: Q3 operating expenses reached $4.776 billion, up 39% year-on-year—including R&D expenses of $2.761 billion (versus $1.630 billion a year ago). The shareholder letter attributes this expense surge mainly to Superintelligence (SI) and other R&D initiatives, stock-based compensation, and sales & administrative costs. Revenue also faced headwinds. The shareholder letter lists year-on-year drags including: lower energy storage revenue, partly due to tariff-related customer refunds; declining average vehicle selling prices; reduced regulatory credit revenue—$113 million this quarter versus $417 million a year ago; and lower delivery volume. Upsides included growth in services and other revenue, a $300 million favorable foreign exchange impact, and additional revenue from FSD subscriptions. Net income was further affected by mark-to-market changes on investments. The cash flow statement shows $142 million in unrealized losses on Tesla’s SpaceX equity stake and $288 million in unrealized gains on digital assets. Tesla’s CFO noted on the earnings call that net income was impacted by mark-to-market adjustments on both SpaceX equity and Bitcoin. The most optimistic development concerned cash flow: free cash flow swung from -$1.092 billion in Q2 to $6.263 billion in operating cash flow in Q3; after subtracting $4.732 billion in capital expenditures, free cash flow rebounded to $1.531 billion. Cash, cash equivalents, and short-term investments stood at $45.447 billion at quarter-end—up $1.9 billion sequentially. Tesla’s CFO stated on the earnings call that the full-year capital expenditure guidance has been revised to $20 billion—primarily funded by operating cash flow. The company has secured $30 billion in short-term debt financing to cover future capex, and tariff refunds will be used to expand U.S. manufacturing. Cars are selling—but deliveries are bottlenecked by batteries In Q3, Tesla produced 464,391 vehicles—up 4% year-on-year—and delivered 486,532 vehicles—down 2% year-on-year.

Energy Insider: Tesla Q3 Net Profit Plunges 43%, SpaceX Merger Under Scrutiny; Total Social Electricity Consumption Up 3.9% in First 9 Months

Oct 23, 2026

China's National Energy Administration issued guidelines to integrate coal power with new energy via five scenarios, exempting curtailment from usage stats and providing subsidies. Total social electricity consumption rose 3.9% in the first nine months.

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Energy Insider: Tesla Q3 Net Profit Plunges 43%, SpaceX Merger Under Scrutiny; Total Social Electricity Consumption Up 3.9% in First 9 Months

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