Tesla's stock slid more than 3% in after-hours trading on Wednesday, reversing an initial gain of about 2% following its third-quarter earnings release. Investors weighed the company's decision to lower its capital expenditure guidance and its measured approach to scaling the Optimus humanoid robot, both of which are central to its long-term growth narrative.
The electric vehicle maker reported positive free cash flow for the quarter, surpassing expectations, but the reduction in planned investment raised questions about the pace of spending on artificial intelligence, robotaxis, and robotics. These areas are widely seen as the pillars of Tesla's future growth strategy beyond its core automotive business.
Tesla trimmed its full-year capital expenditure forecast to approximately $20 billion, down from a previous estimate of more than $25 billion. CFO Vaibhav Taneja explained during the earnings call that the revision reflects efficient capital deployment and that the company plans to fund the spending primarily from operating cash flows. He also noted that Tesla secured the ability to borrow up to $30 billion to support expected growth in capex.
The lower spending could help preserve Tesla's financial flexibility as it prepares for an ambitious expansion. However, it may also signal a more cautious approach than some investors anticipated in areas considered critical to the company's future.
Tesla spent $4.7 billion on capital expenditures in the third quarter, double the amount from a year earlier but below the $7.5 billion analysts had expected, according to LSEG data. The company reported free cash flow of $1.53 billion, versus expectations of a $4.92 billion cash burn.
"The free cash flow beat was a pleasant surprise, but when combined with the lower-than-expected capex, raises questions on the next step for the automaker," said Ryan Lee, senior vice president of product and strategy at Direxion, which offers ETFs tied to Tesla, in a Reuters report. "Lower capex suggests less of an 'all-in' approach to the AI arms race than one would expect from Elon."
CEO Elon Musk had previously described 2026 as "a massive capex year" and expressed confidence that the investments would generate "the best capex returns that we've ever seen." Taneja said spending would continue to expand over the next few years as Tesla scales its Robotaxi fleet, increases Optimus production, installs solar manufacturing capacity, purchases additional superintelligence computing infrastructure, and builds a semiconductor fabrication facility.
Tesla's revenue for the quarter came in at $28.05 billion, slightly above the average analyst estimate of $27.88 billion, according to LSEG data. Adjusted earnings per share reached 48 cents, beating expectations of 43 cents.
On Optimus, Musk cautioned that scaling production would take time despite early progress. "We've started what I'd call early production on our high-volume line in Fremont," he said, adding that the growth of Optimus follows an S curve with a shallow and bumpy initial slope. He estimated it would take at least a year, possibly longer, to reach an annualized rate of 20,000 units per week. "Optimus is a very big deal. I do want to temper expectations that we still have a lot to get through," he added.
The comments underscored the execution challenges involved in turning Tesla's robotics ambitions into a large-scale business, even as investors look for new growth engines beyond electric vehicles.
Tesla also declined to provide further details about a potential merger with SpaceX, another issue drawing investor attention as the two companies expand their collaboration. Travis Axelrod, Tesla's head of investor relations, said the company would not address questions on a potential merger during the earnings call. Some Wall Street investors view a combination as increasingly likely, but Musk told SpaceX investors on Tuesday that discussions between the boards remained at an early stage and that a merger was not certain.
The companies have grown closer through projects including Terafab, their planned chip-making initiative, adding to speculation about a broader combination. CFRA analyst Garrett Nelson wrote that investor sentiment has shifted from concerns about cash burn to questions surrounding the potential merger with SpaceX, which he views as nearly certain and expects could happen by the end of 2027.
This article is for informational purposes only and does not constitute financial advice.
