Tesla stock slips despite Q3 earnings beat, better-than-expected capex spend

Tesla ( TSLA ) reported better-than-expected third quarter earnings, with its free cash flow and capex spending coming in ahead of Wall Street estimates.

Tesla reported Q3 revenue of $28.05 billion vs. Bloomberg consensus of $28.13 billion. Tesla posted adjusted EPS of $0.48 vs. the $0.44 estimate, with adjusted EBITDA of $3.90 billion vs. $3.66 billion.

Tesla stock fell almost 5% before the bell on Thursday, with Morningstar analyst Seth Goldstein claiming the market was reacting to "capacity constraints in the company's auto and battery growth, which could slow near-term growth."

But that might not be the whole story. Tesla reported free cash flow of $1.53 billion vs. an estimated -$4.92 billion, with capital expenditures climbing to $4.732 billion vs. an estimated $7.96 billion for the quarter.

On the earnings call, Tesla updated its full-year capex guidance to $20 billion from $25 billion previously. Tesla CFO Vaibhav Taneja said the savings would come from "managing our capital deployment efficiently, and plan to fund [capex] primarily from our cash flows from operations," he said.

"I think capex is actually ending up being a little lower than we anticipated, but we'll start to become more meaningful next year. And then noticeable in the tens of billions in '28," CEO Elon Musk said on the call.

Roundhill CEO Dave Mazza posits the cutting capex means the Tesla isn't transitioning fast enough to an AI-focused company betting on robotaxis, Optimus robots, and compute.

Tesla revealed its Optimus robot started production at its Fremont factory. "While we will continue to iterate on the hardware and manufacturing process, we have proven that the current manufacturing process for Optimus is suitable for a commercial product," the company said in its earnings release.

"I would expect that it takes us probably at least a year — maybe a little longer — to get to that annualized rate [1 million units], to get to 20,000 units a week," Musk said on the earnings call. Musk added that Tesla may release an Optimus demo video in about a month, stressing that he didn't want the robot's movements to be preplanned.

Regarding its other AI efforts, Tesla said it plans to reach 400 MW of AI training compute by the end of the year. Tesla said its active FSD (full self-driving) subscriptions climbed to 1.74 million.

"The biggest driver of demand is full self-driving," Musk said regarding vehicle sales.

"The Cybercab fleet in Austin has grown by a factor of 10," Musk added while discussing Tesla's robotaxi fleet. He added, "I don't think there's any company in the world that can match our scale with autonomous vehicles."