Tesla reported financial results for the third quarter of 2026 on Wednesday, October 21. The company posted surprise positive free cash flow of $1.53 billion, significantly ahead of the $4.92 billion cash burn that analysts had projected.
The results came as Tesla reduced its 2026 annual capital expenditure forecast to approximately $20 billion, a reduction from its previous forecast of more than $25 billion. In the third quarter, Tesla’s capital spending was $4.7 billion, lower than the $7.5 billion estimated by analysts according to LSEG data. Ryan Lee, a vice president at Direxion, said the lower spending "raises questions on the next step" and suggested a less aggressive approach to the AI market.
CEO Elon Musk stated on Tuesday, October 20, that a merger between Tesla and SpaceX was a "good idea" and that special committees had been formed to evaluate a potential deal. On a Wednesday conference call with analysts, Musk declined to elaborate further. Thomas Monteiro, an analyst at Investing.com, said the cash flow figures "make the financial logic harder to ignore" as SpaceX prepares to invest up to $40 billion in a single quarter.
Tesla's revenue was flat year-over-year but exceeded Wall Street targets, while net income fell by 43%. The company reported its largest vehicle backlog in four years, noting demand in Europe and high gasoline prices. Automotive gross margin, excluding regulatory credits, was 18.1%, beating estimates of 16.7%.
Tesla's stock initially rose 2% in after-hours trading before reversing to trade down 2%. The shares have declined approximately 14% since the start of the year. The company is aiming to produce 5 million vehicles annually by about 2030, an increase from the 2.5 million expected in 2026.