There are generally two ways for a company to increase its profit: increasing sales or cutting costs. Preferably both at the same time — because a rise in revenue might be overshadowed by spiking expenses.
That's what happened to Tesla in the third quarter. Revenue at Elon Musk's electric vehicle company rose 12% year on year, the first increase in three quarters. Despite that, net income plunged 37% from a year earlier.
The culprits? Lower vehicle prices, presumably in a bid to compete with Chinese manufacturers that are vacuuming up market share, as well as a 50% increase in operating expenses partly due to artificial intelligence and "other R&D projects," according to Tesla.
Investors didn't appear too pleased by Tesla's after-the-bell report, sending its shares 3.8% lower in extended trading. The company's earnings report followed disappointing ones from Netflix and Texas Instrument the day prior, which caused their shares to sink 10% and 5.6% respectively during regular trading Wednesday stateside.
Those moves dragged down the broader market. The three major U.S. indexes fell, though they managed to regain some losses by the session's close. Still, the S&P 500 and Nasdaq Composite are now looking at declines for October, for now.
There's just six more days of trading before October ends. But that's six days packed with earnings reports from tech behemoths such as Alphabet , Apple , Meta and Microsoft , which could very well turn around the fate of stocks.