Good morning. The earnings are growing. So is the bill. Tech is selling off before the open as investors weigh Meta’s AI spending, Tesla’s uneven margin recovery and another rise in oil.

Premarket, around 7:17 a.m. ET: QQQ −1.69%; SPY −1.02%. These are ETF quotes; the scoreboard below compares yesterday’s closes with this morning’s prices. Reuters reports renewed concern over AI investment costs alongside higher oil prices.

Today: the evidence that Meta’s ad models work, the adjustments behind Tesla’s energy profits, Lam’s equipment surge, and fresh results from Spotify and Honeywell. Abbott supplies the portfolio shake-up.

Meta’s AI ads improve. Its cash bill grows faster.

Meta Connect, September 2024 archive; cropped. Manuel Orbegozo / Reuters.

Meta has measurable evidence that its ad models are helping customers. Its investment spending still exceeds the cash its operations generate. Q3 revenue rose 26% to $64.60 billion; shares were down about 2.29% around 7:17 a.m. ET.

Revenue beat management’s previous $61–$64 billion range and the $63.38 billion Zacks analyst average dated October 20, retrieved through Fiscal.ai. The operating business is delivering more than the market expected before the release.

On the earnings call, the CFO said expanded deployment of the GEM advertising model increased app-ad conversions by 9.6% and offsite-campaign conversions by 1.7%. These are separate management measurements, not percentages to add together or proof that AI generated a particular share of total revenue. Call and financials.

The cash comparison is less comfortable. Operating cash flow grew roughly 9% to $32.79 billion, while capital spending including finance-lease principal jumped roughly 80% to $34.91 billion. Free cash flow was therefore negative $2.12 billion, versus positive $10.63 billion a year earlier.

Our reading: the evidence supports better advertising performance, but the spending programme has moved ahead of its current cash returns. That is a timing and capital-allocation problem investors can measure; one negative quarter does not establish a liquidity crisis. Nor should every dollar of company-wide capex be labelled AI.

Meta narrowed full-year capex guidance to $135–$145 billion and expects Q4 revenue of $73–$76 billion. Its proposed Class C stock dividend would give existing shareholders nonvoting shares, preserving voting control while adding flexibility for future share issuance. The dividend itself brings in no cash.

The strongest support for the spending is the same ad growth funding it. Sustained cash generation catching up with investment would strengthen the case; weakening ad performance while commitments rise would undermine it.

Tesla’s margin rebound has an adjustment inside.

Megapack battery storage installation; cropped. Courtesy of Tesla, Inc..

Tesla’s car margins improved, but a large part of the company’s gross-profit rebound came from energy, where management cited tariff refunds and warranty adjustments. The shares were down about 3.38% around 7:17 a.m. ET.

Q3 revenue was $28.05 billion, adjusted EPS $0.48 and free cash flow $1.53 billion. Adjusted EPS exceeded the Zacks analyst average of roughly $0.45 dated October 19. The better headline needs a closer look at the businesses underneath.

Source: Tesla quarterly updates. Comparable segment margins; bars share a 0–40% scale. Auto figure excludes regulatory credits; energy is reported gross margin.

Regulatory-credit revenue fell to $113 million from $146 million, so bigger credit sales do not explain the automotive improvement. CFO Vaibhav Taneja attributed the ex-credit margin gain to a higher Asia-Pacific delivery mix. Management discussed FSD demand separately without quantifying its contribution to that margin change.

Energy gross profit rose from $640 million to $954 million, despite lower segment revenue. Its $314 million increase supplied approximately 42% of Tesla’s $743 million sequential gross-profit increase—our calculation from the reported figures.

On the call, Taneja said energy’s margin improvement primarily reflected tariff refunds and warranty true-downs, including vendor reimbursements. Tesla did not quantify those benefits, so a precise margin excluding them cannot be calculated from the disclosure.

Our view: the quarter shows improvement, but it does not yet establish a repeatable 33% energy margin. The counterargument is substantial: management reported a record energy order rate and backlog and expects better selling prices and margins. Profits holding up after these benefits roll off would make the recovery more convincing.

Tesla also cut expected annual capex to about $20 billion from more than $25 billion. That supports near-term cash retention, while giving investors less spending to extrapolate into the AI-and-robotics expansion story.

Lam’s equipment sales surge. The stock still falls.

Bengaluru, 2024 archive; cropped. Gpkp / Wikimedia · CC BY-SA 4.0.

Nearly all of Lam Research’s sequential revenue growth came from new systems. The company is shipping more equipment into the chip buildout even as its shares joined the selloff, down about 7.45% around 7:17 a.m. ET.

September-quarter revenue reached $8.22 billion and adjusted EPS $2.20. Both exceeded the midpoints of management’s earlier $8.1 billion revenue and $2.15 EPS guidance. That is a comparison with the company’s forecast, rather than a claim about an unverified analyst consensus.

Systems revenue climbed 34.9% sequentially to $5.73 billion. Customer-support-related revenue and other sales increased just 0.6% to $2.49 billion. Of the roughly $1.50 billion increase in total revenue, about $1.48 billion came from systems.

That mix identifies the driver: new equipment purchases, rather than a broad acceleration in service and installed-base revenue. The support category also includes spares, upgrades and non-leading-edge equipment, so it should not be treated as a pure subscription business.

The December-quarter outlook calls for $8.6 billion revenue, plus or minus $400 million, and adjusted EPS of $2.33, plus or minus $0.15. The revenue midpoint implies another roughly 5% sequential increase.

Our reading is that reported demand remains strong while investors are repricing what they will pay for it. The risk is cyclicality: customers can delay equipment purchases when capacity plans change. This morning’s share-price decline alone is not evidence that those orders have collapsed.

Spotify adds subscribers. Profit narrowly clears guidance.

Stockholm headquarters, archive; cropped. Goombah / Wikimedia, CC0.

Spotify beat its subscriber target and kept improving margins year over year, but its operating-profit beat was only €2 million. The more useful finding is steady execution with an extra payroll-tax cost to absorb.

Premium subscribers reached 306 million versus 305 million guided; monthly active users of 788 million matched guidance. Revenue rose 16% to €4.97 billion, which Spotify classified as in line with its rounded €5 billion forecast. Growth was 14% at constant currencies.

Premium revenue grew 17%, helped by both subscribers and pricing: average monthly revenue per Premium user reached €4.95, up 9.3% reported and 7.5% at constant currencies. Advertising revenue grew 10%. The business is earning more per subscriber while expanding its audience.

Operating profit was €672 million versus €670 million guided. Share-related payroll taxes were €13 million above forecast; lower-than-expected marketing and personnel costs helped offset them. Gross margin reached 33%, up 1.36 percentage points year over year, although below Q2’s 33.4%.

The counterweight is cash: free cash flow fell 9% year over year to €735 million. Q4 guidance calls for 316 million Premium subscribers, €5.2 billion revenue and €820 million operating profit. Our reading: pricing and subscriber growth support the earnings case, but the quarter deserves more precision than an uncomplicated “big beat.”

Where big tech finished.

Mag 7 plus AMD, Broadcom and Micron: our editorial watchlist. USD prices. October 21 daily changes compare with October 20; October 22 premarket changes compare with October 21’s close.

Premarket quotes retrieved 7:17 a.m. ET, October 22; individual last trades 7:13–7:17 a.m. ET. Pre = premarket. Changes use unrounded prices. Yahoo Finance quotes.

Yesterday’s gains preceded the evening earnings releases. Outside this watchlist: Robinhood −3.95% and TSM −3.20% in premarket quotes from 7:15–7:17 a.m. ET.

The simultaneous selling supports a broad retreat from growth and AI exposure. It does not establish a separate negative announcement at every company. Robinhood also carries exposure to trading activity and crypto sentiment.

Abbott’s $8.5B nutrition split is the catalyst.

Hangzhou factory, 2014 archive; cropped. MNXANL / Wikimedia · CC BY-SA 4.0.

Abbott plans to separate its nutrition business, while its tightened earnings range leaves the old midpoint unchanged. The portfolio decision is the bigger development than the guidance wording.

The proposed standalone company would have approximately $8.5 billion in annual sales, including brands such as Ensure and Similac. Abbott expects completion by the end of 2027 through a tax-free distribution to shareholders, subject to conditions.

The logic is greater focus: nutrition gets its own investment priorities, while the remaining Abbott concentrates more heavily on medical technology. That can change the growth and margin mix investors own. It does not automatically create value; debt allocation and separation costs still matter.

Q3 adjusted EPS was $1.42, the midpoint of prior guidance. The new annual range is $5.50–$5.55, versus $5.45–$5.60 previously. Both midpoints are $5.525. Calling this an earnings upgrade would overstate what changed. Quarterly results.

Honeywell turns 7% organic growth into 23% more profit.

Charlotte headquarters, archive; cropped. Scott Ritchie / Wikimedia · CC BY-SA 4.0.

Honeywell’s first quarter as a standalone automation company shows operating leverage, helped by pricing and the removal of stranded costs. Organic sales rose 7%; segment profit increased 23%.

Reported revenue rose just 1% to roughly $5 billion, reflecting a different comparison after divestitures. Building and process businesses each grew 8% organically; industrial automation grew 4%. The growth reaches all three segments, rather than depending on one large order.

Segment margin expanded 3.7 percentage points to 21.3%, and adjusted EPS rose 34% to $2.27. Honeywell raised its annual adjusted EPS outlook to $8.40–$8.45, lifting the midpoint by $0.23.

There is a limit to extrapolating the cost benefits. Eliminating stranded costs is a finite opportunity, and process-business margins fell 2.1 percentage points because of project mix and acquisition dilution. Still, this is evidence of improving industrial earnings beyond the AI spending cycle.

Oil adds another cost pressure.

Higher oil prices compound the earnings debate by raising transport and input costs. Reuters linked this morning’s rebound to renewed Gulf supply concerns. The pressure reaches airlines, manufacturers and households; it is a separate risk from whether AI investments earn adequate returns.

Weekly initial jobless claims fell to 194,000, down 6,000 from the previous week’s revised 200,000. Continuing claims rose 25,000 to 1.728 million.Department of Labor release.

The Fed pause remains the favored outcome.

Polymarket’s October Fed-decision contracts priced no change at 88.5% and a 25-basis-point increase at 11.5%, in the official update at approximately 7:03 a.m. ET, October 22. Other small-probability outcomes are omitted.

Resolution follows the change in the upper bound of the federal-funds target range against its pre-meeting level. These are traded contract prices, not the Fed’s forecast. A renewed oil shock could complicate the inflation outlook without guaranteeing a hike.

The Street’s changes.

Elevance Health: Jefferies raised its price target to $510 from $450, reported October 22 at 6:15 a.m. ET. Dated update.

Bank of America: TD Cowen cut its target to $56 from $60, reported at 5:53 a.m. ET. Both items are target revisions; neither establishes a rating upgrade or downgrade. Dated update.

Crypto, briefly.

Coinbase spot quotes retrieved around 7:04 a.m. ET: Bitcoin $81,896; Ether $2,402. These are point-in-time USD prices, not daily returns. Crypto weakness adds context to Robinhood’s decline, without proving it is the sole cause. Bitcoin · Ether.

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Analyst expectations and Data provided by Zacks Investment Research, Inc., www.zacksdata.com. Company guidance, reported results and C&C calculations are identified separately. Independent market commentary; forecasts are not guarantees.