Meta and Tesla earnings preview: two very different businesses, one AI dream

Key takeaways

• Meta's advertising business funds its AI ambitions, but rising costs are testing its profitability.

• Tesla's robotaxis and robotics offer new growth opportunities, while its car business faces pressure and spending accelerates.

• Both earnings reports will test whether ambitious AI investments can eventually translate into sustainable profits.

Meta recently launched an artificial intelligence (AI) assistant that can organise your life. Tesla unveiled a Roadster that can leap into the air. Very different products, but surprisingly similar investment stories.

On 21 October, both companies report third-quarter earnings as investors increasingly question the enormous sums being spent on AI.

Meta wants AI to transform how billions interact with technology. Tesla wants it to transform transportation and robotics. Both have ambitious plans, but the question is shifting from what AI can do to what it can earn.

Meta: advertising pays the bills, AI promises the future

Meta, the company behind Facebook, Instagram and WhatsApp, has an important advantage: a highly profitable advertising business and billions of potential customers.

Its ambitions now extend well beyond advertising.

In September, Meta launched Muse, an AI assistant capable of handling everyday tasks, including managing schedules and booking travel. More recently, it introduced Muse Wonder, a more advanced AI model, alongside new smart glasses and an enterprise platform for businesses.

These launches could create new revenue streams through subscriptions, business services and connected devices. Meta can also introduce them to its enormous existing user base.

Meanwhile, AI is already improving advertising performance, helping Meta's traditional business grow.

But there is a catch: the costs are growing even faster.

Second-quarter revenue increased 28% to 60.8 billion USD, while expenses rose 55%. Operating margins fell from 43% to 31%, and free cash flow, the money remaining after operating and investment costs, dropped to 784 million USD.

With capital expenditure expected to reach 130 billion USD to 145 billion USD in 2026, investors will closely examine advertising growth, spending guidance for 2027 and early signs of Muse adoption.

Meta's opportunity is to build new businesses on top of an already profitable one. The challenge is ensuring the new ambitions do not consume too much of the old business's profits.

Tesla: cars today, robots tomorrow

Tesla faces almost the opposite challenge.

The electric-vehicle maker increasingly wants to become an AI and robotics company, with robotaxis, humanoid robots and energy storage playing bigger roles.

Its recent Roadster unveiling demonstrated impressive engineering, but the more important developments concern Cybercab, Tesla's purpose-built autonomous taxi, and Optimus, its humanoid robot.

Both could eventually open substantial markets. However, moving from demonstrations to large-scale commercial operations remains a major challenge.

Meanwhile, Tesla's existing car business faces growing competition and pressure on profitability.

Third-quarter deliveries reached approximately 487,000 vehicles, exceeding expectations despite falling around 2% from a year earlier. The critical question is whether Tesla can protect margins, particularly without relying on regulatory credits earned by selling emissions allowances.

Energy storage offers another opportunity. Tesla deployed 13.7 gigawatt-hours of batteries during the quarter, supporting an already established business that benefits from growing electricity demand.

Still, the investment bill is substantial. According to analyst estimates compiled by Bloomberg, Tesla’s capital expenditure is expected to exceed 25 billion USD in 2026, putting pressure on cash generation.

Unlike Meta, which is mainly using AI to strengthen an existing business, Tesla is investing partly to become a different company altogether.