Meta and Tesla Earnings Preview: Two Different Businesses, One AI Dream
Published on October 20, 2026 by Ruben Dalfovo, Investment Strategist
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.
Introduction
Meta and Tesla are set to report their third-quarter earnings on October 21, 2026. Despite their vastly different products, both companies share a common narrative centered around ambitious AI investments. Investors are increasingly scrutinizing the substantial amounts being spent on AI and whether these investments can yield profitable returns.
Meta: Advertising Funds AI Ambitions
Meta, the parent company of Facebook, Instagram, and WhatsApp, leverages its highly profitable advertising business to fund its AI initiatives. Recently, Meta launched Muse, an AI assistant designed to manage everyday tasks, and Muse Wonder, a more advanced AI model. These innovations, along with new smart glasses and an enterprise platform, could potentially create new revenue streams through subscriptions and business services.
However, while revenue grew by 28% to $60.8 billion in the second quarter, expenses surged by 55%, leading to a decline in operating margins from 43% to 31%. Investors are particularly concerned about the projected capital expenditures of $130 billion to $145 billion by 2026, which could impact profitability.
Tesla: Cars Today, Robots Tomorrow
Tesla is transitioning from being primarily an electric vehicle manufacturer to an AI and robotics company. The recent unveiling of the Roadster showcased impressive engineering, but the focus is on the development of Cybercab, an autonomous taxi, and Optimus, a humanoid robot. These innovations could open up substantial new markets, but the shift from concept to commercial viability poses significant challenges.
In the third quarter, Tesla delivered approximately 487,000 vehicles, slightly down from the previous year. The company faces increasing competition and pressure on profitability, particularly as it moves away from relying on regulatory credits for revenue. Additionally, Tesla's capital expenditures are expected to exceed $25 billion by 2026, raising concerns about cash generation.
Risks and Investor Considerations
Both companies face unique risks. Meta must navigate rising infrastructure costs, intense competition in AI, and privacy concerns. Tesla, on the other hand, deals with execution delays, regulatory hurdles, and competition in the electric vehicle market. Both companies also risk facing valuation challenges if investors have already priced in future successes.
Investors are advised to monitor revenue growth against expenses, profit margins, and free cash flow. The success of new product launches will be critical, as will the upcoming spending cycles and overall valuations.
Conclusion
Meta and Tesla are pursuing ambitious AI futures from different starting points. Meta relies on its advertising profits to fund new ventures, while Tesla aims to redefine itself beyond automotive manufacturing. The upcoming earnings reports will provide insights into whether these ambitions are translating into stronger business fundamentals, as the focus remains on profitability amidst lofty aspirations.