Meta beats revenue with stock split plan; Tesla slips despite earnings beat

Meta shares rose about 2% in after-hours trading after the company reported diluted earnings per share of $3.83, up from $1.05 a year earlier, on revenue of $64.60 billion, up 26% year over year. Analysts were expecting earnings of $3.56 per share on revenue of $63.3 billion, according to SiliconANGLE. The earnings figure absorbed a $9.89 billion charge tied to an August agreement with 52 attorneys general to settle litigation over teen mental health and social media; payments under the deal could reach about $18.59 billion. Excluding the charge, earnings would have been $7.40 per share.

Meta’s operating margin fell to 20% from 40% as total costs and expenses jumped 68%, to $51.61 billion. Net income still rose to $9.86 billion from $2.71 billion, because a one-time tax charge had depressed last year’s number. Advertising made up $63.06 billion of revenue, with the average price per ad climbing 14% on 10% more impressions. Daily active people across Meta’s apps averaged 3.64 billion in September, up 3%.

Capital expenditures, including principal payments on finance leases, came to $34.91 billion, more than the $32.79 billion in cash generated by operations. Free cash flow was negative $2.12 billion, after shrinking to $784 million in the second quarter. Headcount ended September at 66,775, down 15% following job cuts in May. Founder and Chief Executive Mark Zuckerberg said Meta’s investments are paying off, citing the launch of the Muse personal agent and the Muse Wonder model. More than 10 million people in the U.S. and Canada set up Muse accounts in about six weeks, he told analysts, but the service has not launched globally because it takes so much computing power to run.

The stock split will come through a dividend of new Class C shares, one for each outstanding Class A and Class B share, once an amended certificate of incorporation takes effect on Jan. 19, 2027. Meta intends to list the new stock on the Nasdaq. A special committee of independent directors recommended the change, saying the shares give Meta a way to raise capital, pay employees and fund acquisitions. Zuckerberg’s control is unaffected, with about 60.6% of the vote on a 13.4% economic interest, according to an information statement Meta filed.

Zuckerberg also signed what Meta calls a Founder Alignment Agreement. Only 20% of the Class C shares he receives can be sold freely. Selling any of the rest means also selling a Class A share or converting a Class B share, either of which trims his voting control. The restricted shares unlock at 2.5% a quarter for as long as he stays a full-time executive or executive chair. The agreement also commits him to remain a California resident, or live wherever Meta keeps its headquarters, for eight years. The information statement says that if California voters pass the wealth tax measure on Nov. 3, Zuckerberg could owe billions of dollars in tax; he had told the committee he was weighing a move out of the state.

For its fourth quarter, Meta expects revenue of $73 billion to $76 billion, against the $73.65 billion analysts had forecast. The full-year capital expenditure range narrowed to $135 billion to $145 billion, from $130 billion to $145 billion. The legal charge pushed the full-year expense outlook up to $175 billion to $179 billion. Losses at Reality Labs, Meta’s virtual and augmented reality hardware unit, should narrow to about $15 billion next year, from $18 billion to $19 billion this year, as investment moves toward artificial intelligence. Meta gave no revenue forecast for 2027.

Tesla shares fell more than 3% in after-hours trading after the electric car maker beat earnings expectations on revenue that came in a little under forecasts. Early after-hours gains, which followed a 3.4% rise in the regular session, reversed once the earnings call got underway. For the quarter ended Sept. 30, Tesla reported adjusted earnings of 48 cents per share, down from 50 cents a year earlier, on revenue of $28.05 billion, flat year over year. SiliconANGLE, citing a consensus Tesla compiled from 23 sell-side analysts, said analysts expected 45 cents per share on revenue of $28.34 billion. The Guardian reported Wall Street projections of $27.9 billion in revenue and 43 cents per share.

Those analysts had expected Tesla to burn through about $4.5 billion of free cash in the quarter, according to SiliconANGLE. The company generated $1.53 billion, largely because capital spending of $4.73 billion came in some $3 billion below the consensus estimate. Cash and investments ended September at $45.4 billion. Operating income fell 56%, to $718 million, as operating expenses rose 39%. Most of the increase came from research and development, where spending reached $2.76 billion against $1.63 billion a year earlier. Gross margin improved to 19.6% from 18%. On an unadjusted basis, net income attributable to common stockholders dropped 43% to $787 million.

Automotive revenue slipped 3% to $20.56 billion, with regulatory credits contributing $113 million against $417 million a year ago. Deliveries, which Tesla disclosed on Oct. 2, came to 486,532 vehicles, down 2%. Battery supply was still capping vehicle output, Tesla said in its shareholder update, and the quarter closed with the largest passenger vehicle backlog in four years. Chief Executive Elon Musk told analysts that demand is exceeding production by a significant margin. Energy storage deployments rose 10% to 13.7 gigawatt-hours in a quarter that also saw a new Megafactory in Texas begin production, with planned capacity of 50 gigawatt-hours a year. Revenue from the segment still fell 16%, to $2.88 billion. Musk said Tesla’s Megapack grid-scale battery systems are almost sold out for 2027.

Active subscriptions to Full Self-Driving (Supervised) reached 1.74 million, up 67% from a year earlier, and more than three in four new vehicles delivered in North America now come with it. Tesla’s purpose-built Cybercab robotaxis have been carrying passengers in Austin since Sept. 3. Musk said the fleet there has grown tenfold in that time, and Tesla plans to take the robotaxi service to Dallas next month. Production of Optimus humanoid robots has started on high-volume lines in Fremont; Musk said getting to 20,000 units a week will take at least a year, maybe a little longer, and he expects to start delivering Optimus to companies outside Tesla around the end of next year.

Tesla cut its capital spending forecast for 2026 to about $20 billion, from more than $25 billion. Chief Financial Officer Vaibhav Taneja said the plan is to fund it primarily from cash flows from operations. Tesla also secured up to $30 billion in borrowing capacity during the quarter, he added. The shareholder update carried no delivery forecast for the fourth quarter. Musk said on the call that the company is aiming for about 5 million vehicles a year by around 2030. The Guardian reported that Musk had floated a merger with SpaceX on a call with SpaceX investors on Tuesday, saying there is a lot of merit to combining the companies. Musk said boards for both businesses had formed special committees to explore a potential merger but had not agreed on terms; the move would require approval from 50% of all Tesla shareholders.

Editor's Summary

Meta beat revenue expectations and announced a nonvoting Class C stock split while absorbing a $9.89 billion legal charge. Tesla beat adjusted earnings but posted flat revenue and lower automotive sales, and its shares fell after hours as Musk floated a possible SpaceX merger. Meta’s free cash flow turned negative in the quarter, while Tesla’s capital spending came in below forecasts.