Musk deflects Tesla-SpaceX merger question on earnings call, cites growing overlap

Topline

Elon Musk on Wednesday deflected questions about a direct merger between his SpaceX and Tesla during the automaker's earnings call, following months of speculation about a future tie-up of his two firms. The world's richest person said there is increasingly more "overlap" between them.

Key Facts

• Musk's response: In reply to a question from Wells Fargo analyst Colin Langan about a possible merger between Tesla and SpaceX, Musk said: "We can't talk about, you know, combining companies and that kind of thing on an earnings call—it has got to be done with the appropriate process."

• Growing overlap: Musk noted there is "more and more overlap" between Tesla and SpaceX, citing Starlink's integration into Cybertrucks—and later inclusion in all Tesla vehicles, according to Musk—as well as TeraFab, a proposed AI chip manufacturing venture between Tesla, SpaceX and xAI, which is now a SpaceX subsidiary.

• AI for Optimus: Musk said xAI, now known as SpaceXAI, will develop an AI model to serve as a "manager" for Optimus, Tesla's robots that Musk has claimed could be the "biggest product ever."

• Tesla's legal stance: In response to Langan's question, Tesla's general counsel said the automaker will "continue to benefit from our relationship with SpaceX," citing "numerous beneficial transactions" and investments between them.

Tesla Misses on Earnings, Despite Revenue Beat

Tesla reported second-quarter revenue of $28.2 billion, beating consensus economist projections of $27.2 billion, according to FactSet. However, the firm posted earnings of 33 cents per share, falling well below estimates of 55 cents. Tesla also reported its first quarter of negative free cash flow in more than two years, running just over $1 billion in the red. Chief Financial Officer Vaibhav Taneja reiterated that Tesla planned to spend more than $25 billion this year, noting that figure will likely rise in the coming years.

Key Background

Some analysts have suggested that Tesla and SpaceX could merge, as Musk has worked to fold his companies into one another. SpaceX President Gwynne Shotwell told CNBC that a deal combining the rocket maker with Tesla "might make Elon's life a little easier," arguing there was "no question that there are synergies between Tesla and SpaceX in our futures." Musk reportedly discussed the possibility of combining the two companies, and Tesla employees have purportedly said many workers at the company are expecting a transaction to take place. Former Wedbush Securities analyst Dan Ives said ahead of SpaceX's initial public offering last month that his firm had placed odds of 80% or higher for Tesla and SpaceX merging by 2027, writing in a separate note that the "groundwork is already in place for both operations to become one organization."

Further Reading

Forbes: Could Musk Merge SpaceX And Tesla? Here's What Analysts—And Betting Markets—Say