Shares of Tesla dropped 4% in pre-market trade on Thursday, October 22, as investor sentiment weakened after the electric vehicle maker cut its capital expenditure forecast, clouding Elon Musk’s plan to transform the company into an AI and robotics business.
Capital expenditure will be around $20 billion this year, the company said on Wednesday after reporting its earnings. This marked a reversal from earlier this year, when Tesla raised its target to more than $25 billion.
The reduction eases the immediate funding requirement but also raises questions about investment timing. Tesla did not specify which projects would account for the reduction.
Tesla had consistently fallen short of the pace needed to meet its spending target, particularly after reporting a $4.73 billion outlay in the third quarter. Analysts had expected capital expenditure of $7.95 billion on average, according to estimates compiled by Bloomberg.
During the company’s earnings call on Wednesday, Chief Financial Officer Vaibhav Taneja said capital expenditure would continue to grow as Tesla invests in its robotaxi fleet and expands production of the humanoid robot Optimus and solar products.
Heavy spending is needed to help Tesla reorient its operations around futuristic business lines such as artificial intelligence, robotics and autonomous driving. The shift is seen as a central justification for a potential merger with SpaceX — a historic transaction that Musk said this week the companies are exploring.
Tesla’s third-quarter revenue remains flat
Tesla reported third-quarter revenue of $28.05 billion, flat from the same quarter a year earlier. The company said revenue was affected by a decline in its energy business, lower average vehicle selling prices, and a year-on-year drop in deliveries.
Reported net income fell 43% to $787 million, while operating profit declined 56% to $718 million. Operating margin stood at 2.6%, compared with 5.8% a year earlier.
The company had previously reported third-quarter deliveries of 486,532 vehicles, down 2% year-on-year. Although deliveries declined during the quarter, Tesla achieved record deliveries in several regions, including Canada, Australia, Japan, and Taiwan.
Tesla said more than 75% of new deliveries in North America during the quarter included subscriptions to its driver-assistance software, called FSD Supervised in the US. The EV maker also secured approval for the software in four more European countries during the quarter.
Tesla’s AI ambitions face a capital-efficiency test, says Vested CEO
Viram Shah, founder and CEO of Vested, said Tesla’s quarterly performance was more balanced, with revenue broadly flat year-on-year but still beating expectations. Automotive gross margin came in at 18.1%, compared with the expected 16.7%, while free cash flow remained positive at $1.53 billion.
The bigger surprise was the reduction in capital expenditure, with Tesla cutting its 2026 capex forecast to around $20 billion from more than $25 billion earlier.
Shah said big opportunities do not automatically translate into good returns. As Tesla and SpaceX invest heavily across AI, robotics, mobility, and infrastructure, the real test will be how efficiently that capital is converted into durable earnings and cash flows.
He added that any potential combination of the two companies could create strategic optionality, but investors should continue to assess each business based on its own economics, balance sheet, and ability to compound value over time.
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