SpaceX Doubles Revenue, Netflix Slides, GM Falls on Costs, Capital One Jumps

Good evening. This is Trade and Ticker. Tuesday, October twentieth, twenty twenty-six. Your evening company deep dive after the close.

Four stories tonight, and three of them broke after the closing bell. First, SpaceX. In only its second report as a public company, revenue more than doubled, and its A-I business is now its biggest business. The stock is higher after hours. Second, Netflix, which beat on profit but gave a weaker outlook and cut its advertising forecast. The stock is down after hours. Third, General Motors, which beat Wall Street's forecasts this morning and still fell almost seven percent, because of what it said about costs. And fourth, a split decision after the bell. Capital One jumped on a big earnings beat, while Intuitive Surgical, the maker of the da Vinci surgical robot, and United Airlines both moved lower. Let's get into it.

First, a quick look at the board. This was a blue-chip day, not a tech day. The Dow rose about one percent, or roughly five hundred thirty points. The S-and-P five hundred rose about three-tenths of a percent. And the Nasdaq finished essentially flat, down just a couple hundredths of a percent. Small companies did better than all three, with the Russell two thousand up about one and two-thirds percent. The Dow led, and the Nasdaq lagged.

That's almost a mirror image of yesterday. On Monday, the Nasdaq carried the market on a bounce in chip stocks, while the Dow slipped and most stocks outside of tech fell. Today, the rest of the market took its turn. Rising stocks outnumbered falling ones by a wide margin, and big tech mostly sat it out.

Health care was the star. The sector rose more than two percent and hit a record high. Eli Lilly gained about three and a half percent and touched an all-time high, after positive trial results for its ulcerative colitis drug in children. UnitedHealth and Merck both rose about three percent. Real estate, utilities, and financials were all up more than one percent. Technology was the weak spot, down about three-tenths of a percent. Meta fell about one and a half percent ahead of its earnings tomorrow night, and Alphabet and Apple each fell about one percent. The Philadelphia chip index slipped about three-tenths of a percent, after Monday's big bounce.

There were some huge moves on this morning's earnings, too. Equifax and Hasbro both jumped about eleven percent. 3M rose almost six percent after it raised its profit forecast and expanded its data center partnership with Amazon. Northrop Grumman rose more than four and a half percent. Hold on to those names, because they'll matter when we get to General Motors.

Now rates and oil. The ten-year Treasury yield eased to about five-point-one-one percent, a little lower than Monday. Brent crude touched a five-month high overnight, after Houthi attacks on Saudi oil sites, and then turned lower during the day. Part of that pullback came from an unconfirmed report that mediators had offered a proposal to restart talks between the U.S. and Iran. Lower oil helped stocks find their footing after a shaky start. The VIX, Wall Street's fear gauge, fell about six percent, to around seventeen and a third. So it was a calmer day overall, even with a full calendar of earnings.

That brings us to the evening's main event.

Deep dive number one: SpaceX.

Let's start with why this report mattered so much. SpaceX went public in June, and its first report as a public company, back in August, did not go well. The company spent about eighteen-point-four billion dollars on capital projects that quarter, most of it on A-I, and the stock dropped. So the question tonight was simple. Is all that spending starting to turn into revenue and profit?

Tonight's answer was a loud yes, at least for this quarter. SpaceX reported revenue of about fourteen-point-six billion dollars. That's up one hundred sixty-one percent from a year ago, and well above the roughly twelve-point-seven billion analysts expected. The company also swung to a profit. Net income was about four-point-four billion dollars, compared with a loss of about one-point-one billion in the same quarter last year.

The big driver was A-I. SpaceX now calls that business Super Intelligence, and it brought in about seven-point-six billion dollars of revenue in the quarter. A year ago, it brought in about eight hundred thirteen million. That's roughly nine times bigger, and it's now the largest piece of SpaceX. Analysts had expected about six-and-a-half billion from that business, so it beat by a wide margin.

Where's that money coming from? Mostly from renting out computing power. SpaceX has signed deals to provide data center capacity to customers like Anthropic, Google, and Reflection A-I. In that sense, a lot of SpaceX's A-I business looks more like a cloud company than an A-I lab. It also closed its purchase of the A-I coding company Cursor in August, a deal valued at about sixty billion dollars, and Cursor added about six hundred eight million dollars of revenue between the closing and the end of September. And SpaceX pointed to more people using Grok, its A-I model, across businesses and consumers.

Here's the part that may matter most to investors. A quarter ago, the A-I business lost about one-point-three billion dollars from operations. This quarter, it made a profit of about four hundred thirty-one million. That's a big swing, and it came even after more than one billion dollars of stock-based pay tied to the Cursor deal.

Now Starlink, the satellite internet business, which has been SpaceX's steady earner. Connectivity revenue rose about sixty-nine percent from a year ago, to about five and a quarter billion dollars, ahead of what analysts expected. Starlink ended September with about thirteen-point-six million consumer subscribers, up from twelve million at the end of June. And the average consumer paid about sixty-nine dollars a month, up from sixty-six last quarter. That number is worth watching. A year ago, it was eighty-three dollars, because as Starlink grows in more countries and adds cheaper plans, the average bill tends to come down. This quarter, it went back up. Starlink is also now on more than thirty-eight hundred aircraft.

Starlink is still where most of the operating profit comes from. Connectivity earned about two-point-four billion dollars from operations, roughly double a year ago.

The rocket business, the part most people picture when they hear SpaceX, was the smallest piece. Space revenue was about one-point-eight billion dollars, up about six percent from a year ago, and it lost about seven million dollars from operations as SpaceX keeps pouring money into Starship. The good news there is that Starship flew its first orbital flight in the quarter and delivered twenty-six of the newer, more powerful Starlink satellites. SpaceX says that one flight added roughly ten times the download capacity of a typical Falcon nine Starlink launch. The company also kept adding work to its launch schedule. It signed three more NASA space station crew missions and eighteen national security launch missions in the quarter. And it announced plans for a new spaceport in Louisiana, built to handle thousands of Starship flights a year, with the first launch targeted for twenty twenty-nine. None of that moves the numbers much today, but it shows the rocket business is still lining up more customer launches while Starship gets ready.

Now the spending, which is what spooked investors last time. SpaceX spent about nineteen-point-six billion dollars on capital projects in the quarter. About sixteen-point-four billion of that went to the A-I business. That's an enormous number, but it was right around what analysts expected, and slightly below the estimate for the A-I piece. The company's computing capacity reached about one-point-seven gigawatts at the end of September, up from one-point-four at the end of June. On the call, Elon Musk said SpaceX aims to deploy power and cooling infrastructure, quote, at a rate that is vastly faster than anyone else.

So how did the stock react? SpaceX finished the regular session almost exactly flat, at about one hundred forty-seven dollars and seventy-nine cents. After the report, it rose about three to four percent in after-hours trading. Some of the A-I names moved with it. Nvidia, CoreWeave, and Nebius were all up a few percent after hours, after a quiet regular session.

Here's what to keep in mind. This is one quarter, and the bill for A-I keeps rising. SpaceX is spending more than it brings in on its A-I buildout, and a lot of that A-I revenue comes from a handful of big cloud contracts. It also matters where interest rates go, because building data centers this fast takes a lot of borrowed money, and rates are still high. But tonight, SpaceX gave investors what they wanted to see. Revenue is growing faster than expected, and the A-I business made money.

And there's a second Musk report coming. Tesla reports tomorrow after the close, and the talk of a possible tie-up between Tesla and SpaceX has been getting louder. Neither company has committed to a deal. But expect questions about it.

Deep dive number two: Netflix.

Netflix had a very different night. On the surface, the quarter looked fine. Netflix earned eighty-seven cents a share, ahead of the eighty-two cents analysts expected. Revenue grew almost twelve percent from a year ago, right in line with forecasts. Net income was about three-point-seven billion dollars, up from about two-point-six billion a year ago.

So why is the stock falling? Three reasons.

First, growth is slowing. That roughly twelve percent revenue growth was the slowest in nearly three years, and Netflix expects growth to slow a bit more in the fourth quarter. Netflix said the price increases it put in place in March landed about the way it expected. But the company is still growing more slowly than it used to.

Second, the outlook. Netflix forecast fourth-quarter profit below what analysts expected. And it now expects full-year revenue toward the low end of its earlier range. The company also said part of this quarter's profit beat came from the timing of expenses. That means some of those costs are just landing later, not going away.

Third, and this one stings, advertising. The cheaper plan with ads has been a big part of the Netflix growth story. Netflix now expects about two-point-seven billion dollars of ad revenue this year, down from its earlier forecast of about three billion. The company blamed a slower-than-expected rollout of some of its ad tools. That's a cut of about ten percent to a business investors were counting on.

There's also a lot going on inside the company. Last week, Netflix said it was laying off about six percent of its staff, roughly one thousand people. Its chief content officer, Bela Bajaria, is leaving that role. And Peter Rice, a former Disney executive, is taking over the job. Netflix said the layoffs will weigh on its fourth-quarter results.

Then there's the question that has followed Netflix all year. Are people watching less? Netflix addressed it head-on in its letter to shareholders. It wrote, quote, we know there's some investor concern about our view hours growth. But it added that engagement, meaning how much, how well, and how widely people watch, remains healthy. Netflix laid out a plan to get viewing growing faster. It wants to offer more entertainment, use technology to improve the service, and make more money from its audience. That includes licensing more shows from other studios, and investing in live events and in originals that get people talking.

The competition is the bigger issue. Netflix isn't just up against other streaming services anymore. It's competing with YouTube and TikTok for people's free time. One analyst at the research firm Forrester, Mike Proulx, put it bluntly. While Netflix is growing, he said, the pace of that growth is slowing. He called it a wake-up call.

So the stock. Netflix fell almost one and seven-tenths percent in the regular session heading into the report. After the numbers, it dropped about five to six percent in after-hours trading. This was a company that beat on profit and still disappointed, because investors care more about where growth is headed than about one quarter's earnings.

Here's what to watch from here. The ad business needs to get back on track, and the new content team under Peter Rice needs to show it can get people watching more. The next big test will be the holiday quarter, and whether Netflix can hit the forecast it just gave.

Deep dive number three: General Motors.

GM is a great example of a theme from today, and from this whole earnings season so far. Beating forecasts isn't enough. Investors want to know what comes next.

Start with the quarter itself, because it was good. GM reported revenue of about fifty billion dollars. Its adjusted operating profit rose about twenty-two percent from a year ago, to about four-point-one billion dollars. That worked out to three dollars and seventy cents a share, ahead of the three dollars and sixty-three cents analysts expected. The big reason was pickup trucks. GM sold more of its big, pricey trucks, and fewer electric vehicles, which have historically lost money. Net income came to about three-point-three billion dollars.

GM also announced a new twenty-billion-dollar stock buyback program, after finishing a six-billion-dollar program it announced in January. GM has been buying back stock for years. It had about one-point-two billion shares outstanding at the end of twenty twenty-three. At the end of September, it had about eight hundred forty-nine million. When fewer shares are out there, profit per share goes up.

So why did the stock fall almost seven percent? Because of the guidance and the costs.

GM narrowed its full-year forecast for adjusted earnings to between twelve dollars and seventy-five cents and thirteen dollars and seventy-five cents a share. The middle of that range is below what analysts were expecting. One analyst at C-F-R-A, Garrett Nelson, said the selloff mostly reflected disappointment that the midpoint came in below Wall Street's number.

The bigger worry is costs. GM said commodity inflation, including higher costs for logistics and computer chips, will add up to about two billion dollars this year. That's the high end of what it had been expecting. And the company's chief financial officer, Paul Jacobson, said those costs jumped sharply over the last two months, especially for steel, aluminum, and shipping. He said that if commodity costs don't come down from recent levels, they could take about two billion dollars out of GM's profit next year too.

There's also a near-term hit. GM expects fewer truck deliveries in the fourth quarter as it gets ready to launch redesigned versions of the Chevrolet Silverado and the G-M-C Sierra. Those are its biggest moneymakers. So the products that powered this quarter will be in short supply for a little while.

The company did try to sound confident about next year. GM said the path forward is more challenging, but it still expects better results next year, as long as consumer demand stays strong and cost pressures ease. And Jacobson said the consumer has held up remarkably well, and that GM hasn't seen anything that points to weakness.

One more issue came up today. Hybrids. GM bet big on electric vehicles over the last decade and decided not to offer hybrids. Now hybrids are more than fifteen percent of U.S. sales, and GM has lost market share this year. The C-F-R-A analyst said GM faces a tougher road because it lacks hybrids. On the call, Chief Executive Mary Barra said GM, quote, will have hybrids, but she didn't give a timeline.

GM closed down about six and eight-tenths percent, at about seventy-seven dollars.

Now compare that with some of the other big industrial companies that reported this morning. 3M beat forecasts, raised its profit outlook, and announced a bigger data center partnership with Amazon, and it jumped almost six percent. Northrop Grumman beat and raised its outlook, and it rose more than four and a half percent. GE Aerospace also raised its outlook, but its free cash flow came in below expectations, and it fell almost four percent. The pattern is clear. The companies that gave investors a better look at the future got rewarded. The ones with a catch in the outlook got punished, even when the quarter itself was strong.

For GM, the key question into next year is whether those commodity costs ease. Steel, aluminum, and chip prices have been climbing, and if that keeps up, it squeezes every automaker, not just GM.

Deep dive number four: a split decision after the bell. Capital One, Intuitive Surgical, and United Airlines.

Let's start with the winner. Capital One, the big credit card lender, jumped about five percent in after-hours trading. It earned six dollars and sixty-nine cents a share on an adjusted basis. Analysts expected about five dollars and fifty cents, so that's a big beat. Total revenue rose about three percent from the prior quarter, to about sixteen-point-three billion dollars.

The beat came from two places. Costs were lower, with spending down about two percent from the prior quarter, including less on marketing. And the company set aside slightly less money for bad loans. Provisions for credit losses came in at about two-point-nine billion dollars. Net charge-offs, the loans Capital One doesn't expect to collect, were about three-point-one billion. And the company actually released about two hundred twenty-five million dollars from its reserves, which is a sign it feels a bit better about its borrowers. The net interest margin, which measures how much the bank earns on its loans compared with what it pays on deposits, rose to about eight-point-four percent.

Capital One is still bringing in Discover, the card company it bought. Chief Executive Richard Fairbank said the Discover integration continues to go well, and the company is making good progress on the cost savings it expected. Capital One is a useful read on the American consumer. With interest rates this high, investors have been worried about whether people can keep up with their credit card bills. Tonight's report suggests they mostly are, at least for now. Capital One held its call at five o'clock Eastern, so more details will come out tonight.

Now Intuitive Surgical, which is going the other way. The stock fell about seven percent in after-hours trading. And this one is a bit of a puzzle at first, because the underlying business looked strong. Revenue rose about twenty-two percent, to about three billion dollars, ahead of expectations. Adjusted earnings were three dollars a share, well above the roughly two dollars and sixty-five cents analysts expected. Procedures using its da Vinci and Ion systems grew about fifteen percent. And the company placed five hundred forty-six da Vinci systems in the quarter, up from four hundred twenty-seven a year ago, including three hundred fifteen of its newest model, the da Vinci five.

So what went wrong? Two things. First, a one-time charge. Intuitive took a four hundred fifty million dollar charge to settle a long-running antitrust class-action lawsuit, without admitting wrongdoing. That pushed its reported profit down to about five hundred twenty-three million dollars, from about seven hundred four million a year ago. Second, and probably more important for the stock, the company kept its full-year forecast for da Vinci procedure growth at fourteen to fifteen percent. It didn't raise it. For a stock that has been priced for strong growth, holding steady wasn't enough. Intuitive had finished the regular session up about one percent.

And finally, United Airlines, which slipped about two percent after hours. United's revenue rose about seventeen percent from a year ago, to about seventeen-point-nine billion dollars, a record. But its adjusted earnings of two dollars and fifty-four cents a share came in just below forecasts, and revenue was a hair light too. The real issue is fuel. United's fuel bill rose about sixty-two percent from a year ago, to about four-point-eight billion dollars. It paid an average of about three dollars and ninety cents a gallon in the third quarter, and it expects to pay more in the fourth.

That's why United's outlook came in well below Wall Street's. It expects adjusted earnings of fifty cents to one dollar and fifty cents a share for the fourth quarter. Analysts were expecting about one dollar and seventy-six cents. The good news is demand. United said people keep booking, even with higher fares, and passenger counts are up more than two percent from last year. Chief Executive Scott Kirby said the results show the strength of building a brand-loyal airline. But with oil above one hundred dollars a barrel, demand alone can't fully offset the fuel bill. United had risen more than two percent in the regular session, so some of that gain is coming back out tonight.

So that's the split. The lender with lower costs and steady credit got rewarded. The surgical robot company with a one-time charge and no raise in its forecast got hit. And the airline with a big fuel bill got marked down.

Here's what to watch into tomorrow. Wednesday after the close is one of the biggest nights of earnings season. Tesla reports, and it holds its call at five-thirty Eastern. After tonight's SpaceX numbers, expect plenty of questions about Musk's companies and any talk of combining them. Meta reports too, and it's the most important one for the A-I trade. The stock fell today heading into the report. Investors want proof that Meta's huge spending on data centers is turning into revenue and profit, not just a bigger spending plan. I-B-M, Texas Instruments, and Lam Research also report tomorrow night, so we'll get a fresh read on chips and enterprise tech.

Also keep an eye on oil and on the ten-year Treasury yield. Oil pulled back today, which helped. But it's still near its highest levels in months, and today's airline outlook showed how much that hurts. And looking a little further out, the Federal Reserve meets next week, on October twenty-seventh and twenty-eighth.

So here's where we are tonight. The Dow had a strong day, led by health care and a busy morning of earnings, while big tech took a break. After the bell, SpaceX showed its A-I business can bring in big money, and the stock is higher. Netflix showed that a profit beat doesn't fix slowing growth. GM showed that rising costs can overshadow a strong quarter. And Capital One, Intuitive Surgical, and United reminded us that the outlook usually matters more than the last quarter.

We'll be back in the morning with the futures and everything you need before the opening bell. Thanks for listening. I'm Trade and Ticker.