Two of Musk's core assets will make their debut together this week.

SpaceX will release its second quarterly report since going public after the close of U.S. markets on Tuesday, followed by Tesla, which will announce its financial results on Wednesday. AI Whether these expenditures can be transformed into sustainable revenue will be a key factor in determining market sentiment. Meanwhile, speculation about a merger between the two companies continues to rise, further increasing the attention surrounding this week's earnings season.

The options market currently expects that the stock price of SpaceX to fluctuate by as much as 7.5% this week. Regarding Tesla, analysts predict that its earnings per share after adjustments in the third quarter will be around 43 cents, lower than the 50 cents from the same period last year, and the free cash flow is expected to be negative $4.92 billion, indicating significant profit pressure. The financial reports of both companies will directly test the growth momentum of Starlink (Starlink) and the profitability of Tesla's automotive business, to see if they can provide sufficient support for the increasingly expanding capital expenditures of AI.

Merged Conjectures: Timing and Signals

The market's discussions about the merger of SpaceX and Tesla have clearly accelerated recently.

Barclays released a report last week indicating that the two parties may announce the transaction before Tesla's annual general meeting of shareholders, and SpaceX is more likely to play the role of the acquirer. Tesla announced on Monday that its annual general meeting of shareholders will be held on December 3. However, neither of the two companies nor Elon Musk himself has made any official statements regarding the transaction.

Barclays estimates that if the transaction is completed entirely in stock, Musk will hold approximately 37% of the equity and 56% of the voting rights in the merged entity.

Camelthorn Investments advisor Shawn Campbell states that, 'The plan for SpaceX to acquire Tesla is more structured and concise,' Campbell holds shares in both companies simultaneously.

Last Thursday, Musk provided the market with a visually imaginative piece of material: Tesla unveiled a new Roadster sports car at its SpaceX test site in Texas. This car utilizes rocket technology and is capable of jumping and flipping in the air, with production planned to begin in 2028.

REX Financial Research Supervisor Bill Birmingham interprets this as a deliberate signal release. "Elon Musk is merging automotive and rocket technologies, which has at least planted a seed in the minds of investors, providing evidence for the synergistic efficiency of the merged project." He also pointed out that the timing of this announcement, on the eve of Tesla's annual shareholders' meeting, is by no means coincidental.

SpaceX: The Pressure of Burning Money and Financing for AI

The biggest mystery of this financial report lies in when its AI business will be able to achieve break-even.

According to the consensus forecasts of analysts compiled by Bloomberg, SpaceX is expected to report revenue of approximately $12.7 billion to $12.84 billion in the third quarter, a significant increase from $7.8 billion in the second quarter. Adjusted earnings per share are expected to be between $0.14 and $0.16, marking what could be the company's first profitable quarter since its listing.

AI expenditures are the biggest concern in the current market. In the second quarter, the AI division of SpaceX (now renamed SpaceXSI) recorded a operating loss of $1.26 billion, and AI capital expenditures amounted to $15.8 billion, far exceeding market expectations and also significantly higher than the $7.7 billion in the first quarter. Evercore ISI predicts that SpaceX capital expenditures will reach approximately $151 billion in 2027, with the AI segment expected to bear "the main driving force for growth."

Morgan Stanley analyst Adam Jonas wrote in a research report released on Monday, "The need for additional financing remains the main factor suppressing market sentiment; this is the biggest risk in our model, and we don't want to downplay it – the scenario where SpaceX cannot raise funds will have a broader impact on the entire economy and investor portfolios." Jonas expects the debt issuance pace over the next few years to be: $60 billion in 2027, $80 billion in 2028, and $90 billion in 2029.

Previously, according to Daily Report, SpaceX was seeking to raise approximately $40 billion to purchase NVIDIA's high-end AI chips. The proposed plan included a bank loan of about $10 billion and $30 billion in investment-grade bonds.

The timing of releasing financial reports on Tuesday this time has also drawn market attention – the company did not announce the financial report date until last week, after Tesla released its report, which is much later than the usual pace for listed companies. Analysts believe that the company may wish to release the latest financial data before advancing to the next round of financing, or perhaps to lay the groundwork for the upcoming large-scale sales ban lifting. It is expected that the sales ban on approximately 1.3 billion shares will be lifted on October 22nd, and another 329 million shares will follow on October 24th.

In terms of Starlink business, in the second quarter, the revenue of the Connectivity segment increased by 66% year-on-year to $4.3 billion, and the segment's operating profit grew by 79% year-on-year to $1.7 billion. The number of subscribed users doubled to 12 million, with average revenue per user remaining flat at $66. In the third quarter, revenue for this segment is expected to further increase to approximately $4.45 billion. Additionally, on October 8th, SpaceX announced the acquisition of 800MHz spectrum assets under Grain Management for about $8 billion. This transaction still requires approval from the Federal Communications Commission (FCC) and is seen as an important foundation for SpaceX to expand its Starlink mobile services.

Tesla: Profit under pressure, but the long-term story supports the valuation

The core pressure Tesla faces this quarter comes from the profit side, rather than the delivery side.

In the third quarter, Tesla delivered a total of 486,532 cars, exceeding analysts' expectations, although there was a slight year-on-year decline of 2%. However, the market's focus has shifted from delivery volumes to profitability. Analysts expect adjusted earnings per share to be around 43 cents, lower than the 50 cents from the same period last year; the gross margin is expected to be 17.9%, and the operating profit margin is expected to be only 2.5%.

The pressure on capital expenditure cannot be ignored either. Tesla has stated that its capital expenditure this year will exceed $25 billion, and analysts expect free cash flow in the third quarter to be negative $4.92 billion. In the second quarter, Tesla's free cash flow was already negative $1.1 billion, marking the first time it has been negative in over two years. Tesla's stock price has fallen by approximately 17% since the beginning of this year.

Nevertheless, Wall Street's valuation logic for Tesla is still primarily based on its long-term narrative. Autonomous taxis ( Robotaxi ) and Optimus humanoid robots are generally regarded as potential growth engines with high profit margins, and are expected to gradually surpass the contribution of traditional automobile sales in the future. Tesla plans to widely promote autonomous taxi services over the next few years, although the scale of its related business is still much smaller than that of Waymo at present.

Campbell of Camelthorn Investments summarizes the focus of investors this week into two points: "For SpaceX, it is the growth in Starlink revenue, not the number of launches; for Tesla, it is the improvement in the profit margin of its automotive business."