Market Overview - The Dow is down approximately 320 points, with the S&P 500 down about 0.6% and the NASDAQ down about 1% [1][2][3] - Small caps are down 1.5%, indicating a broader market weakness [4] - The VIX has decreased but remains elevated, indicating ongoing market volatility [5][6] Tesla Earnings Expectations - Tesla's Q3 revenue is anticipated to be $26.27 billion, reflecting an increase of nearly $1 billion compared to the previous year, with adjusted EPS expected at 53 cents [10] - The company sold a record 479,000 cars last quarter, driven by the expiration of the tax credit [11] - Investors are keen to learn about the future of Tesla's robotaxi initiative and developments in China [12][13] Broader Earnings Context - Big tech earnings are on the horizon, with investors awaiting the CPI report that could influence the Fed's next moves [15] - Analysts have noted that corporate health appears strong despite trade war disruptions and tariff concerns [18] - The market is currently focused on whether the rally can broaden beyond a few mega-cap names [21] Tesla Q3 Results - Tesla's Q3 adjusted EPS came in at 50 cents, below the consensus estimate of 54 cents, while revenue was reported at $28.1 billion, exceeding expectations [76][79] - Gross margins for Q3 were reported at 18%, better than the estimated 17.2% [77] - Free cash flow for Q3 was $3.99 billion, significantly above the expected $1.25 billion [77] Future Outlook for Tesla - Analysts predict potential softness in EV demand in the US following the expiration of the EV tax credit, with expectations of declining deliveries in Q4 and 2026 [88][89] - The introduction of lower-priced models may help boost sales, but competition remains a significant factor [91][92] - The success of Tesla's robotaxi initiative and AI developments will be critical for future growth [96][101] IBM Earnings Overview - IBM's Q3 operating EPS was reported at $2.65, beating the estimate of $2.41, with revenue at $16.33 billion, also above expectations [106][107] - Consulting revenue was $5.32 billion, exceeding the estimate, while software revenue was in line with expectations at $7.21 billion [110][111] - The AI business segment is now valued at over $9.5 billion, indicating strong growth potential [107]

Tesla's Automotive Business - Cheaper Model Y and Model 3 versions are intended to offset the expiration of the federal EV tax credit, potentially recovering about 66.67% to 75% of the lost tax credit value [2] - The core auto business faces headwinds, with the valuation increasingly aligned with robo-taxi initiatives [3] - Tesla shifted away from developing a hyper-competitive hatchback (Model 2) towards prioritizing robo-taxi development, indicating a focus on capital efficiency [4] - New, cheaper models are expected to dilute margins in the automotive sector [6] - A 19% drop in unit deliveries is expected next quarter due to the expiration of the $7,500 tax credit, which is unlikely to be fully offset by the $5,000 price reduction [7][8] Energy Business Performance - The energy business achieved record performance, delivering 12 gigawatt hours [10][11] - While the energy business accounts for only 15% of revenue, it contributes 25% of the company's profitability [11] - The energy business is expected to help fill the gap created by the automotive sector's challenges [11] Market and Regulatory Factors - The expiration of the $7,500 federal EV tax credit in North America led to a pull-forward effect, boosting deliveries in the previous quarter [7] - The regulatory tax credit, distinct from the EV tax credit, is also disappearing, further impacting margins [8]