Yesterday, after Wall Street closed, it was the turn of two giants: Meta and Tesla.
Both are pouring enormous amounts of money into artificial intelligence. Both are seeing pressure on profitability. At Meta, earnings per share came in below expectations. At Tesla, net income fell by almost 30%.
And yet, both stocks rose in after-hours trading.
How is that possible?
META'S REVENUE
Let’s start with Meta. Quarterly revenue reached $64.6 billion, up 26% from a year ago and above expectations.
Where did all that growth come from? Advertising, of course. Ad impressions increased by 10%, while the average price per ad rose by 14%. In other words, more ads, and more expensive ones.
There was, however, one big catch. Earnings per share came in at $3.83, below expectations. Why? Because total expenses surged by 68%. And included in that figure was a $9.9 billion charge related to legal matters. Yes, you read that correctly.
What about users? Meta's apps had 3.64 billion daily active users, slightly below the 3.65 billion analysts had expected.
Nevertheless, everyone's attention is focused elsewhere: artificial intelligence.
In September, Meta launched Muse, a personal assistant that can shop and make appointments. Muse quickly climbed to the top of the app charts and helped the stock deliver its best month since 2022.
More recently, Meta introduced Muse Wonder, its first frontier AI model. The company says it can compete with ChatGPT and Claude. If that claim holds up, it would be a remarkable turnaround.
“Our investments are paying off,” said Mark Zuckerberg.
WHAT TO EXPECT GOING FORWARD
Now, let's look at what's coming next.
For the fourth quarter, Meta expects revenue of $73 billion to $76 billion. The midpoint of that range is above the approximately $73.7 billion analysts had forecast.
For the full year 2026, capital expenditures are expected to reach $135 billion to $145 billion. Previously, the lower end of the range was $130 billion.
In other words, Meta isn't slowing down. It's raising the bar even further. And excluding the legal charge, the company still expects operating profit to be higher than last year.
Things get even more interesting here. Meta is creating a new class of shares: Class C shares, which carry no voting rights.
What does that mean in practice? Each shareholder will receive one new share for every share they currently own, similar to a two-for-one stock split.
The difference is that the new shares will not carry voting rights. Trading is scheduled to begin in January.
And why would Meta do this? The company says the shares will be used to raise capital, compensate employees, and potentially fund acquisitions. It also says the move will preserve its founder-led management structure.
And how did the market react? Positively. The stock rose between 3.5% and 4.5% in after-hours trading.
TESLA'S EARNINGS
Now let's turn to Tesla, where the picture is more complicated.
Adjusted earnings per share came in at $0.48, beating expectations. Revenue was nearly unchanged from a year earlier, at $28.05 billion, roughly in line with forecasts.
But let's dig a little deeper.
Cars, the heart of Tesla's business, generated $20.56 billion in revenue, down 3% from a year ago. The energy business fell even further, declining by 16%.
And net income? Down 29%, to $787 million.
Why did profits fall so sharply? Because Tesla is spending increasingly large amounts on robotics and artificial intelligence. Capital expenditures for the quarter reached $4.73 billion.
Meanwhile, its operating margin fell to 2.6%, compared with 5.8% a year ago. In other words, for every $100 in sales, Tesla keeps less than $3 in operating profit.
Of course, not everything was negative.
Gross margin rose to 19.6%, beating expectations. Tesla delivered 486,532 vehicles. Active Full Self-Driving (FSD) subscriptions surged by 67%, reaching 1.74 million.
Free cash flow also returned to positive territory, reaching $1.53 billion after turning negative in the second quarter.
However, it was still 62% lower than a year ago.
TALKS OF A TESLA-SPACEX MERGER
And this is where the robots enter the picture.
At Tesla's Fremont facility in California, where the company has been manufacturing cars, production of Optimus, its humanoid robot, has begun.
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Tesla says these are its first robots to reach production-grade quality. Initially, however, they will work inside Tesla's own operations. They will perform tasks and collect data to help train the robots.
Meanwhile, production of the Tesla Semi has also begun in Nevada.
Looking ahead, Tesla says it will make use of its existing factories before building new ones.
But there's another factor to consider.
One day earlier, during a SpaceX investor update, Elon Musk said that a merger between the two companies would be a “good idea.” Both companies' boards have already established special committees to discuss the possibility.
“So, is a merger coming?” you might be wondering.
Not so fast.
Musk said he feels as though he's “tap-dancing through a minefield.” He also stressed that shareholders will ultimately make the decision.
At Tesla, approval requires the support of holders representing 50% of all outstanding shares. As Musk put it, that's “a pretty high bar.”
Nevertheless, the stock closed the regular session up 3.4%, then gained another 1.5% to 1.8% in after-hours trading.