Tesla's Q3 was a really good report, easing worries over robot and AI spending: EPS of 48 cents beat the 44-cent estimate, gross margin 19.6% beat 17.8%, and free cash flow was 1.53 billion versus an expected -4.99 billion. FSD subscriptions of 1.74 million beat estimates; energy storage was soft.

Yeah, we're looking at 6% lower here. But we're going to jump again because Tesla has come out a little in advance of its reporting time. So we'll dive right into these numbers.

Q3 their EPS coming in at 48 cents. The estimate was looking for 44, but it is down from 50 cents a year ago. Revenue coming in at 28.05 billion. That just narrowly missed the estimates which were looking for about 28.13.

It is also down fractionally, 210 of a percent year-over-year.

Their automotive revenue of 20.56 billion beat the estimates looking for 19.83 there. Energy generation and storage revenue came in at 2.88 billion. That missed pretty significantly.

The street was looking for 3.91 billion. So it's a more than a billion dollar miss there in terms of that energy and storage unit.

Services and other revenues coming in at 4.61 billion. That did beat the consensus was 4.3 billion. Their gross margins at 19.6% the estimate was for 17.8.

Their free cash flow which is not negative uh is 1.53 billion versus an estimate of -4.99 billion. So, they did turn uh free cash flow positive here after being negative in the previous quarter.

They also say their active full self-driving subscriptions reach 1.74 million. That beat the estimates looking for a little bit more than one and a half million full self-driving attach rate they said exceeds 75% in North America.

Uh they also ended the quarter with its largest passenger vehicle backlog in four years.

They've begun production for Optimus in Fremont and Tesla Semi in Nevada. And the Austin Fab equipment commissioning is set to begin in 2027.

Tesla also says that it plans to reach 400 megawatts of SI training compute by year end. So a lot of numbers uh to digest there. But let's dive into the ones that we have. Uh the street is still mulling these.

I think likely waiting to hear from Elon Musk, but we are moving higher. KG, what stands out to you most here?

>> Well, margin improvement, I think, is the first thing that really kind of stands out. we have to, you know, be mindful of the fact that we are not seeing those subsidies here in the United States like we have seen in the past.

So, it took some time and it's still kind of probably going through the the fundamentals here, but we are now starting to see more of a normalization without the the the stimulus if you will from the government. So, that's one thing.

Uh the other thing here that I'm looking at is FSD. the adoption did exceed the street's expectations handedly and that's also a services type revenue that could actually grow substantially over time and that is something that is uh is starting to work out.

I mean at the end of the day you know a couple years ago it seemed like it was more of a a fantasy for those that were Tesla um enthusiasts and now it's actually a reality and and they are starting to see it uh improve.

not too surprised when it comes to energy energy storage. Analysts are pretty good at being able to to see out two three quarters to see what that revenue number is going to be just because of the scale of that business.

And I think last but not least, Tesla delivered more vehicles than it did uh produce. And so that actually drew on inventories. That's also a tailwind for them as well. So getting rid of inventories, improving uh gross margins as well as the FSD product offering.

This is a a really good report for a name that's seen a lot of good news over the last couple weeks.

>> And Sam, and we've talked extensively about Tesla, about SpaceX, about Elon Musk. And as we look here, one of the big conversations I know we talked in preview about was the free cash flow and the surprise negative free cash flow last quarter.

They've almost completely returned themselves back to where they were in Q1. I think they were at 1.44 billion. We're at 1.53 billion now in this quarter. But more significantly, the expectation was for negative almost $5 billion.

So, I mean, we're $6.5 billion off of the expectation.

I'd love to know what if you think uh we're going to hear anything more from Elon Musk about the merger tie up or if he said all he's going to say yesterday. >> Who knows? Who knows, Marley?

I mean, I have no idea. We'll have to wait and see. But yes, I think that number on the free cash flow really stood out to me as well as one of the metrics because it seems like from everything you read out and everything we're hearing from this report right now really addressed a lot of the areas that the street was really focused on going into this report.

I mean this seems to have potentially as far as the reaction is concerned straight out of the gate here kind of eased some of the worries about you know all the investments that they were making particularly in those kind of new areas like uh robots um and you know AI etc. because they touched on obviously the deliveries uh you and I were just speaking about EVs here in the US a minute ago but the energy storage business yes a bit soft but the free cash flow um obviously the capex that they had guided for uh was a lot more this year than last year

so as I said um I think what is important on this call beyond the numbers that they're reporting is just some color on obviously where that money is going like the Optimus production lines uh the cyber cab ramp the terra fab factory the FSD adoption uh particularly given some of the developments in Europe that we've heard about.

Um certainly as far as the next target cities for robo taxis, cyber cabs, where they're planning to expand to an update on the humanoids, uh the Optimus uh robots of course, where does production stand, when we will see deliveries, when we will see deployments, when these things will be in our house getting stuff for us from the fridge.

Um but yes, the merger talk. Um I think obviously he hinted at that last night. He said it would be something that he would support. Um, we were talking about this KG and I earlier today as well and I'm sure you had many conversations yourself Marley about, you know, how closely tied these two stocks could be, you know, as far as you know, trading in tandem now and then obviously if this does become um, you know, the potential outcome, what that would mean as far as, you know, shareholder approval, but then, you know, all the other parties involved because obviously Elon Musk has his fingers in lots of different pies and China included there as well.

>> Yeah, absolutely. I mean, as we just look at the move, it's getting higher for Tesla. We're up almost 2% now as we await to hear uh from Elon Musk,