Tesla Cuts Its Capex Forecast and Surprises With Positive Cash Flow as Musk Weighs a SpaceX Merger

October 22, 2026 · Category: Business & Tech

Tesla (NASDAQ: TSLA) went into Wednesday's report with Wall Street braced for heavy spending and came out with the opposite. The company cut its 2026 capital expenditure forecast to roughly $20 billion from more than $25 billion and reported $1.53 billion in free cash flow, where analysts had expected a $4.92 billion cash burn, Reuters reported. Third-quarter capex was $4.7 billion, double a year earlier but well below the $7.5 billion analysts expected, per LSEG data.

The rest of the quarter was mixed. Revenue was $28.05 billion, flat from a year ago but above estimates, and GAAP net income fell 43% to $787 million, according to Tesla's update filed with the SEC. Automotive gross margin excluding regulatory credits was 18.1%, above the 16.7% analysts expected, per Visible Alpha data cited by Reuters. Tesla delivered 486,532 vehicles, said its passenger-vehicle backlog is the largest in four years, and reported a record energy-storage order rate as Megafactory Texas began production.

Why spend less now? The timing points to SpaceX (NASDAQ: SPCX). On Tuesday, Musk said combining the companies was "a good idea," and independent directors at both formed special committees to review a deal, NBC News and TechCrunch reported. No terms have been agreed, Musk is excluded from the talks as a conflicted party, and any merger would need shareholder approval. On Wednesday's call he declined to say more.

Reuters framed the tension plainly: a stronger cash position helps Tesla heading into any deal, but less investment in AI, robotaxis and humanoid robots could undercut the growth story investors are paying for. One analyst it quoted said the lower capex suggests "less of an 'all-in' approach to the AI arms race than one would expect from Elon."

On market impact, Reuters said Tesla shares rose 2% after hours on the results, then reversed to trade down 2%; the stock had fallen about 14% this year.

Tickers: NASDAQ:TSLA, NASDAQ:SPCX

Why it matters

Tesla's quarter reads less as an earnings story than as the opening move in a possible combination of Musk's two largest public companies. Cash discipline makes Tesla's balance sheet look sturdier ahead of merger talks, while SpaceX is preparing much heavier AI spending, so how the two capital plans fit together is now the central question. This is reporting only, not investment advice.

Sources

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