# Tesla, Meta, and the Streaming Wars

**Podcast:** Prof G Markets
**Published:** 2026-10-22

## Transcript

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If money is evil, then that building is hell.
Welcome to Prof G Markets.
I'm Ed Elson.
It is October 22nd.
Let's check in on yesterday's market vitals.
The major indices rose with SpaceX's earnings sparking a rally in tech.
SpaceX shares climbed 8% and Tesla's got a boost too ahead of their earnings report.
We will get to that in just a moment.
Brent crude rose back towards $110 per barrel.
The yield on 10-year treasuries was stable.
And finally, Netflix shares fell 5% following their earnings.
Stick around for the end of the show to find out why.
Okay.
What else is happening?
Tesla shares rose around 1% after the company reported third quarter earnings.
Total revenue was flat year over year, which was in line with analyst expectations.
However, its automotive business continued to struggle with both revenue and deliveries falling from a year earlier.
One bright spot was its positive free cash flow, which was a surprise to analysts.
But after Tuesday's SpaceX earnings, Elon Musk confirmed that special committees are evaluating a potential merger between Tesla and SpaceX.
So the question on most investors' minds actually has nothing to do with earnings.
Most investors are wondering, is Tesla...
about to merge with SpaceX.
Joining us to break down these earnings and this potential merger question, we are speaking with Kareem Booster, co-founder and managing partner at DVX Ventures and former vice president at both Tesla and Lyft.
Kareem, good to see you.
Thank you for joining us.
Let's start with the earnings, which seem to be largely in line with what analysts had expected.
I'm most interested in the fact that the auto business, the deliveries and the sales are down.
We knew that was going to happen because we'd gotten the deliveries numbers before.
So I don't think there was any surprise here for Wall Street to react to.
But let's just start with overall reactions to the earnings and also what's going on with the car business.
Tesla, last week, made the roadster fly.
And the question this week was all about the numbers and the question, answering the question whether the car business that is currently paying the bill can actually pay the bills for the big moonshots that the company is working on.
And from the analysis of the numbers this quarter, I would say the answer is partially yes, because You pointed to negative trends that we've known have been happening for a while.
But there's brightness and light for this quarter specifically in that the free cash flow, which is one of the key metrics that we should look at, has improved compared to last quarter.
They generated 1.5 billion in free cash flow.
Gross margins from the auto business have also improved by two points.
And that's driven by execution and ability to generate.
increased margins.
So these are two very important numbers for Tesla because it shows that out of the big moonshots that the company is going to be working on, the car business can deliver its parts in generating some cash that is going to be needed in the coming quarters.
So what is the answer behind those improved margins and also that improved cash flow?
If the car business is in decline, what is going right?
So I think it's all about execution, because if you look at the numbers, so deliveries have not increased dramatically, but the fact that gross margins have improved means that this has been achieved without sacrificing margins with discount and these kind of things.
So I would attribute it really on the level of execution and the focus that the team is able to have to deliver this kind of numbers.
Now, we have to put it in perspective in terms of...
With regards to what the company has to fund, we're talking tens of billions of dollars in capital expenditures that are going to be needed to be funded in the coming quarters.
So this one and a half billion of free cash flow is a small amount.
But the important thing for the car business is to show that it can deliver its part in this big funding that needs to happen in the coming years.
When I look at the test evaluation, trading at more than 300 times earnings, you have the rest of the industry trading at around 17 times earnings.
And you can hear my, I'm skeptical of this stock.
But when I see them marginally increasing those margins, improving their execution for a business that is declining, I'm sort of like, I don't see why it matters.
Like, I'm almost like, You need to be pursuing something so gigantic, so enormous.
When I see the roadster flip and land and fly through the air, I'm like, wow, that looks visually very cool.
But is that the thing that's going to get Tesla to where it needs to be?
Because in order to justify this valuation, I mean, this business has to absolutely explode.
And so I guess I'm thinking about...
Where's the execution on the robotaxi?
Are the humanoid robots proving?
Are we seeing that there is a real market for these things?
So I guess, what would you respond to that skepticism from me?
Yeah, I think you're totally spot on.
So the demo of last week, the point is to prove that Tesla can still achieve and accomplish extraordinary things.
But what really matters to your point is, so like I said, automotive business doing their part, generating a little bit of money that is going to be helpful to fund the big project.
But the next big part of the question is that the robotaxi business and the optimists have to start demonstrating that they can deliver, that Tesla can ramp them, can scale them.
And on that, it's not that much about the numbers because they're too small right now.
It's about starting to meet deliverables and milestones.
So the question, what I'm really going to be focused on in the coming, starting with the earnings call today and in the coming weeks, is are we going to see a plan, a concrete plan, and are we going to start seeing material progress on that plan against that plan that shows that these two businesses are starting to deliver against the milestones that are going to ultimately supposed to take them to achieving these big things?
How do you view it currently?
Do you think that they are, executing on those deliverables?
Do you feel bullish on their execution of the robot?
Let's just focus on the robotaxi because the humanoid, I mean, who knows?
I mean, do you think that it's going well?
Well, it's hard to...
to say that it's going well when we don't see any material number or milestones or deliverables announced by the company that we can look into.
So what we know is that the company is still going very slowly in an effort to...
prove that it can run these robotaxis in a safe way with a very small fleet.
Now, the challenge in this industry for robotaxis, it's all about trust.
It's the priority one, priority zero, one, up to 10.
You need to build the trust from regulators and from the public.
If you don't have trust, you don't have a business.
And I think the company right now, the reason why we're not seeing that material progress that we're looking for is simply because there's still...
tuning and fine-tuning the system.
So that's only step one that they have to pass.
Then you have to demonstrate that you can do that with 100, if you do it with 100 cars, you can do it with 1,000 and 10,000 and ultimately catch up to Waymo, who is currently delivering 500,000 rides every week in a fully autonomous way.
Shifting gears here to this potential merger between Tesla and SpaceX, Elon said that Both companies have formed these special committees to explore a merger.
It seems like this is what he wants to do, which seems like it will have massive implications for both companies, for investors, for Wall Street.
What do you make of this news?
Do you think this is going to happen?
So I think we have to let the processes happen, like you said, with the committees.
I think from a pure...
What really matters at this point, it doesn't change any of what Tesla has to deliver.
The car business has to show that it can fund itself and fund the next moves.
And the robot actually has to demonstrate, as we were saying, that it's going to start delivering.
Now, in terms of what it changes, there's for sure interesting opportunities for both companies.
I think on the Tesla side.
having access to SpaceX compute and AI and being able to share chips is going to be very interesting.
The other opportunity for Tesla is the fact that, unlike Tesla, SpaceX has demonstrated that they are creating this cash-generating engine, Starlink, the ability to rent, compute, and generate billions of dollars every quarter.
So we were talking of the sources of funding for Tesla.
That could be a great opportunity for Tesla, along with the common DNA and vision and capabilities that the two organizations share.
So that's, I think, what could get people excited about the potential merger is this ability for...
for the two organizations that have demonstrated that they share the same ability to execute and deliver and execute very fast, and then combining the different capabilities in terms of the AI and the funding capability.
It still doesn't change what the challenges that the Tesla has to solve, even if you solve autonomous driving.
For the robotaxi, you still have to create a business, and that business happens in the streets, on the ground.
So it's all about making these cars, delivering them, deploying them, charging them, cleaning them, finding customers, and utilizing them, etc.
And these are all things that the SpaceX merger would not help.
It's still things that Tesla is going to have to figure out by itself.
I wonder if Elon believes that it will help.
at least from a stock perspective, because I think about this a lot, what you told us last time you came on the show, which is that the brand of Tesla, the way it's known among the engineering community, it doesn't have that luster that it used to have during its heyday.
And it struggled to attract the top talent in the way that it was able to get them very easily going back a few years ago.
And I wonder if this is his way to take the reputation of SpaceX as this forward-thinking, sexy, new company that's deploying satellites in space and potentially gonna mine asteroids and build colonies on Mars, you name it, that he's taking all of that sexy brand value and then dumping it into Tesla and then...
Perhaps if he does that, if he merges the two together, then investors will say, we're not so worried about what happens on the ground when it comes to your business.
Maybe engineers will say, oh yeah, I am willing to go work for that company because it's sexier and more exciting now.
Like, I wonder if this is his way to sort of change the way that investors see this thing and stop focusing on the fact that the business is struggling, at least on the automotive side, and say, don't worry about it because they're launching rockets into space.
I think I can't comment for what investors might take out of it, but I can comment in terms of the teams and the people.
And you're totally right that it's been the consistent approach for Elon.
The way he attracts incredible people and incredible talent is by creating this bold vision and putting together these moonshots.
that tend to attract and mobilize.
So it's not only about hiring, it's also about mobilizing the energy internally.
And in a way, the demo of last week is part of that.
It's showing, look at what we can do.
Even more so when we put our resources together with SpaceX and we put some thrusters from SpaceX on the roadster.
So it's that kind of thing.
Now, do you need a merger to do that?
Not necessarily, because eight, 10 years ago, remember when Falcon Heavy launched their first payloads, we put the Tesla, I was at Tesla at the time, we put Elon's Roadster in it.
And it did create this kind of shared energy and excitement across the two organizations.
So, but you're right that there is a constant need for the company to create this excitement and attract new talent and mobilize the existing talent towards impossible goals.
Do you think it's a good idea?
I mean, as an analyst, as someone who used to work for one of these companies, is it the right move to combine?
So I think whether it's a good idea depends for whom.
And it also depends on the deal.
And we haven't seen the deal, what the deal looks like.
What I can tell you, as I was saying earlier, in terms of what's in it for Tesla, there's definitely good things that are in it.
the ability to get access to the AI and the compute and the chips that Tesla needs.
It doesn't change fundamentally the work to be done by Tesla, and the merger doesn't help on that because it's still about ramping up this physical business in the real world.
And that's hard work, and that's, as we've seen from other ramps, and we see it with every physical ramp, there's lots of risk and lots of uncertainties.
But it definitely helps on a number of topics.
Yeah, from that perspective.
Okay.
Karim Buster is co-founder and managing partner at DVX Ventures and former vice president at Tesla and Lyft.
Karim, always appreciate it.
Thank you.
Thank you.
After the break, Meta reports earnings.
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Meta reported record revenue in the third quarter, up 26% from a year earlier.
Earnings per share also beat expectations, but took a hit from legal fees tied to its teen mental health settlement.
The company also announced plans to create a new class of non-voting stock to potentially raise the capital needed to develop and run its AI models.
The stock rose more than 3% following the earnings report.
Joining us to break down Meta's earnings, we're speaking with Mark Mahaney, Senior Managing Director at Evercore.
Mark, great to see you.
I'm looking at these numbers.
Revenue up 26%.
It was a beat.
It was an all-time high.
Net income.
I mean, generally speaking, pretty good report, it seems.
What do you make of it?
I think you got it, Ed.
It was a good report.
Expectations were high.
Expectations were met.
There were a couple of really interesting data points they gave about engagement continuing to rise, even double-digit percent year-over-year growth at things like Facebook and Instagram.
And that's due to the use of AI to make the content.
to improve content recommendations.
And then some of the underlying metrics they gave you about 14% increase in price per ad and roughly 10, 12% increase in a number of ad impressions.
A lot of this is, there's a great example out there at the application layer.
meta of a company using AI to improve its business, meta.
So, you know, kudos to them and the guidance they gave for this next quarter implies that this revenue growth is going to stay in this kind of mid to high 20s.
And then they talk about next year, they didn't give a lot of guidance, but they said, you know, strong revenue growth, which is a little unusual for them to do something like that.
And so I think the market's going to interpret that as well, the revenue growth that they're currently doing, which is about 2x that of the industry averages.
should be resilient, should be sticky.
The one thing you did point out is the class C shares that they're offering.
And so a reasonable question is you're doing this to raise capital.
How much capital are we talking about?
And they're not going to answer that now, but I assume we're going to get an answer to that very soon.
Yes, I'm going to return to that non-voting class shares in a moment because it's pretty fascinating.
But you mentioned some of those numbers.
the price per ad going up 14%, the number of ad impressions going up 10%.
It seems like Meta's bread and butter businesses, Instagram, Facebook, I guess now Threads, all of those things are on a tear.
It seems like they're also benefiting from, to whatever extent they're using AI to improve those recommendations.
We're seeing it reflected in the numbers.
I think one of the next questions for Meta, And they got beat up over the summer on this, is are they actually going to see real ROI on their extraordinary capital expenditures?
Which we just learned, I mean, we got confirmation that the full-year CapEx is going to come somewhere between $135 billion and $145 billion.
I'd be curious to get your reactions to this CapEx question, because it seems like the markets...
are more excited about Meta at this point.
But it seems also like, I don't know, there might be some debate.
Well, I think the market's 40% more excited than it was last earnings.
And that's because of products.
I mean, it's because of Muse and Muse Wonderful.
They launched a really killer app.
I haven't heard that.
I haven't used that expression in a long time, but they did.
And Muse is, I don't know if it's still the top of the download charts, but it's pretty damn close to it.
And it has been for 30 days.
And people who have used it, I mean, I don't know that this is the...
personal agent that we're all going to use, but it's got a decent shot of being, and right now they're the only one that's outside of paywall.
And so right now they have essentially the whole market to themselves.
It's sort of shocking along with this company instinct, but just the scale of what's required here.
Right now they really have the market to themselves.
And so the market has seen ROAI.
You're spending all this CapEx and all this R&D and what do we get for it?
And Zuckerberg and company said, well, this is what you got for it.
You got Muse and you got Wonderful.
And most people are.
evaluating wonderful and seeing it back at the frontier or on the frontier for the first time for Meta.
So yeah, the market at least has seen a return in terms of the product, and now it's going to come down to the monetization.
But this company is pretty good at monetizing surfaces and products, whether it's threads or WhatsApp or reels or stories in the past.
So I think the market will probably give them the benefit of the doubt in terms of being able to, they prove that they can generate the products.
Monetization is the easier thing.
Yeah, but what do you think the monetization will look like for this product?
I'm not sure if it's going to be ads.
I actually don't know if they've outlined what it will look like.
But do we know how they will monetize Muse if it's a success?
You know, it came up a little bit, Ed, in the earnings call.
And actually, Press Zuckerberg is one of the other, along with other analysts.
But, you know, I asked him about the timing of monetization.
He actually said it would be a little bit faster than what they typically do in terms of monetizing new surfaces or features as they come out, in part because the costs are so high.
The compute costs are so great.
associated with this.
They made some pretty bold statements on their earnings call about being able to reduce cost 10x, the cost per compute for firm use.
That's a pretty bold statement.
We'll see if they can back that up.
But they talked about monetizing it through subscription revenue, but it'll be...
free for the vast majority of people.
And then through advertising, actually they say a share of transactions.
I'll give you another word for that, Ed, advertising.
So what they're going to do, and they gave you this data point on the call.
They said 25% of Muse users had already...
Um, are using it for commerce related activities.
When I pressed them, that includes travel.
And it said the average price was $200.
Of course that includes travel.
People aren't doing $200.
Not too many people are doing $200 retail purchases, but yeah, if you're going to book travel, of course your, your price points up like that.
And if.
And if Muse is leading people to travel sites, to hotels, to airlines, or to the online travel agencies, it's just a matter of time before they turn to those and say, okay, we're going to want to take rate on that.
I don't know if it's 3%, 5%, something like that.
And so, yeah, that's coming.
And anyway, so that's how they're going to monetize it.
It does seem like Muse has been a phenomenal success.
And we saw that in the usage.
We saw that in the number of downloads.
And I agree with you.
Like, if anyone's going to figure out a way to monetize the crap of a product out of a product, it's going to be Mark Zuckerberg.
But it's also got a very, very high hurdle rate, which is that they spent or are planning to spend $145 billion this year for this, maybe some other things down the line.
So when you think about that number, do you feel confident that this is the thing that's going to generate the return, that's going to make those billions of dollars in data center spending, that's going to make it all worth it?
Or do they need to come up with something else as well?
I don't know.
You're asking the right question, Ed.
One, I think we should think about a couple of things.
I think their CapEx and R&D investments are still further powering the core business.
I think the fact that ad revenue growth is at 26%, again, twice the industry average, I think that's in part due to that CapEx spending, that they are using AI to improve their recommendations, their content recommendations and their ad recommendations and ad targeting.
So there's a little bit of that already helping the core business.
you've got Muse and then you may have some enterprise plays here.
So with this wonderful, I think they, oh, I'm sorry.
I think they're also going to do a meta for business agents.
They gave you a new data point tonight.
They said 500 million businesses worldwide exist, use meta and all of its apps.
And you would know it better than most people.
You know, WhatsApp is that it's kind of the internet if you leave, you know, for vast swaths of the world.
And so, um, uh, The fact that it's got that many small businesses that are on.
in their family or properties.
And so with Meta for Business, a subscription business that may charge each one of these businesses $10, $20, something relatively small a month, but that could be, given a scale of that number of businesses, that could be a big opportunity too.
So I think there's more than just Muse as proving the, you know, generating the revenue and the profits, hopefully over time.
And it's going to need a lot of work to do.
I'm less concerned about the monetization.
I think they'll figure that out.
They're pretty good at it.
Whether they can really bring that cost curve down, that agree.
aggressively.
We'll see.
And then they also have to show us meta business agents and maybe something in the enterprise, although I'm sort of skeptical about meta in the enterprise.
Meta as consumer AI play?
Yes.
Meta as SMB AI play?
Yes.
Enterprise play?
I don't know.
Right.
Yeah.
That seems like there are some questions still at large where investors are kind of expected just to trust Zuckerberg.
Maybe that's the right thing to do.
But speaking of trusting Mark Zuckerberg, we learned about this new non-voting shares that have been issued.
And from my understanding, the reason that they are doing this is so that Mark Zuckerberg or so that Meta can potentially sell more equity, potentially to raise more capital, to potentially build more data centers or invest more in AI, while Zuckerberg continues to maintain essentially total control over the decisions of the company.
I mean, he has been sort of the archetypal founder who has taken advantage of dual-class shareholder structures to decide the trajectory.
So I'm always just kind of a little bit cynical about this, but maybe I shouldn't be because it's worked out for meta-shareholders so far, giving Zuckerberg the control.
But what do you make of that decision?
Well, I guess two things.
I, these class C shares, I, I don't have a strong opinion on whether that's the right way to, to, to do, uh, uh, an equity raise.
If that's what they're going to do.
I don't have it.
It's a little unusual, but it doesn't necessarily make it bad, but yes, this, you know, you're, if you're buying meta, you're buying, you're buying a share of Mark Zuckerberg's company and you don't have to, there's nobody forcing you to, uh, there's a few companies like that.
You're not like, you're not.
You don't have to hold into the owner that way if you buy, say, an Amazon, shares of Amazon or Microsoft.
But there's a few companies like SpaceX, Tesla, and Meta where you are buying into with no real material voting rights.
You're buying into an asset that's owned by the founder.
And so, yeah, I mean, at least it's all up front.
You can decide whether that's a good idea or not.
And, you know, I guess in all fairness, he's sort of the...
He and Musk, I guess, are the only real founders-led amongst the major tech companies that I look at that are still founder-led companies.
And, you know, I think he's done a generally done, generally as a business manager, I think he's generally done a pretty good job.
Mark Mahaney is the Senior Managing Director at Evercore.
Mark, thank you for joining us.
Thanks, Ed.
Netflix stock is sliding again after the company reported its slowest revenue growth in three years.
The streamer's sales rose to $12.9 billion, which was 12% higher than the year before, which sounds OK.
But then you compare it to the previous quarter of nearly 14% revenue growth.
And the quarter before that, with 16% revenue growth, and the quarter before that, where revenue growth was even higher, and you start to realize that Netflix's business is beginning to slow down.
Now, if you were bullish on streaming, this news might have caught you off guard.
Netflix is the premier US streaming service.
It is more valuable than its next two largest competitors put together.
But if you are a regular listener of this show, well, then you're probably not surprised at all.
Because we have been banging this drum for years now that the true threat to Netflix isn't Hulu or Disney or HBO Max or any of these other traditional streaming services, but...
YouTube.
YouTube is now the most popular streaming service in the world.
And as we've argued for a very long time, its power and its influence is only going to rise.
In fact, when we look at YouTube's share of total US TV viewing time, only two years ago, it was number three.
behind Disney and NBCUniversal.
Today, though, it is number one, and it's not even close.
YouTube now commands almost 15% of total viewing time on American televisions.
The runner-up is NBCUniversal and Versant, with less than 9%, and Netflix is even further behind at less than 8%.
In other words, YouTube is almost doubly as popular as Netflix, not on all devices, but specifically on TV, which is, of course, the device that Netflix content is specifically designed for.
So not only is YouTube winning the streaming wars, it is completely running away with it.
And the key difference between YouTube and the rest of the streaming platforms is quite obvious.
It's not that they have a better creative team or a larger content budget.
They don't, by the way.
It's that one is an algorithmic, user-generated platform, and the others are not.
And that's it.
That is why traditional streaming, in my view, is borderline uninvestable.
Because in a world where YouTube and TikTok and Instagram exist, the business model of spending billions of dollars on production costs for shows that may or may not even resonate, that business model is fundamentally flawed.
Streaming is getting murdered by YouTube.
And save for some extraordinary event, I don't see that changing anytime soon.
Okay, that's it for today.
This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer.
Our video editor is Brad Williams.
Our research team is Dan Chalon, Kristen O'Donoghue, and Mia Silverio.
And our social producer is Jake McPherson.
Thank you for listening to Prof G Markets from Prof G Media.
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I'm Ed Elson.
Tune in tomorrow for our conversation with authors Eric Zwick.
and Owen Zadar.
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