Tesla beat profit expectations and avoided cash burn as SpaceX merger is studied

Tesla $TSLA reported adjusted earnings of 48 cents a share for the third quarter and generated $1.5 billion in free cash flow, a turnaround from negative free cash flow of $1.1 billion in the second quarter.

Analysts expected adjusted earnings of 43 cents a share on revenue of $27.9 billion, according to CNBC. Tesla's revenue was $28.05 billion, little changed from a year earlier.

The company released its third-quarter results on Wednesday. Net income attributable to common stockholders was $787 million, or 22 cents a share, compared with $1.37 billion, or 39 cents a share, a year earlier. Income from operations was $718 million, down from $1.62 billion. Operating expenses rose to $4.78 billion from $3.43 billion, which Tesla attributed to higher spending on super intelligence and other research projects, stock-based compensation and administrative costs.

Services and other revenue rose to $4.61 billion from $3.48 billion. Automotive revenue fell to $20.56 billion from $21.21 billion, and energy generation and storage revenue declined to $2.88 billion from $3.42 billion. Tesla delivered 486,532 vehicles, down 2% from a year earlier.

Capital expenditures were $4.73 billion in the quarter, compared with $5.79 billion in the second quarter. Tesla said it expects capital spending of $20 billion this year, a cut from the $25 billion it had projected previously. Cash, cash equivalents and short-term investments ended the quarter at $45.4 billion, up $1.9 billion from the prior quarter.

CEO Elon Musk said during SpaceX's earnings call on Tuesday that combining the two companies would be a "good idea," and that each board has set up special committees to weigh a potential deal, according to CNBC.

Musk added no detail on Tesla's call on Wednesday. "I think I said everything that should be said yesterday," he said, according to CNBC. Tesla executives declined to answer analysts' questions on the subject, according to The Wall Street Journal.

Musk said any merger would be put to a shareholder decision, according to The Wall Street Journal.

Tesla purchased $2.0 billion of SpaceX equity in the first quarter, according to its cash flow statement, and recorded a $142 million unrealized loss on the investment in the third quarter.

Tesla stock dropped over 3% in after-hours trading on Wednesday. SpaceX stock closed 8% higher.