Chicago. Phil. Melissa, the reason the stock is shooting higher is because the adjusted eps is 1. 86 profit for the third quarter. And that is far above what most people were expecting. The expect aches, the consensus out on the street was for a loss of 42 cents a share. Revenue came in a little under expectations at 6. 30 billion the expect aches for 6. 33 billion in revenue and looking at the gross margins, 18. 7 is what most of the analyst were zeroing in on in terms of what the expectation was for the third quarter. Remember, many people believed as they were increasing model 3 deliveries, especially at the higher price point, that we might see higher gross margin process. Well the gap auto gross margin coming in at 22. 3 a couple much production notes, first of all, trial production has begun at shanghai plant preponderate remember ramping up production and deliveries in china into the end of the year the model y according to tesla ahead of schedule in the production beginning in the summer next year and limited volume in the tesla semi come next year as well. The Conference Call, melissa thats the one everybody is focused on when we hear from Tesla Ceo Elon musk coming up after you guys are off the hair you can bet thats the focus. Phil, gross margin as you mentioned it 22. 8. Sequentially better. Gap gross margin sequentially better and cash and cash ka equivalent better year on year as well as sequentially. What stood out to me phil is there is a lot of emphasize on the shanghai factory and looked like they changed the format of the investor letter. Its very different. Its shocking to me. Which is why the people in the newsroom were saying hold on a second what are we looking at. Now you can compare numbers very easily sequentially as well as year on year. But they have a lot of color photos of the shanghai factory where a lot of analyst had questions, right. I think thats going to be a primary focus for all the questions on the Conference Call melissa, remember this china is not only the Worlds Largest auto market its the Worlds Largest ev market. Ive been there. And i know others have been there as well. Tesla is a brand that stands out with chinese buyers. They know that if they can get a successful launch with the factory there. Its notts messy, clean, they have a chance to really do very well at least initially in china and beijing and the tier one cities and filter out from there. Phil, thanks. Phil lebeau in chicago with the latest on tesla you. What did you make of guy. 185 in may, the stock i incorrectly now in retrospects thought the move to 255 squeezed out shorts in the Earnings Period 26 Short Interesting with the majority squeezed as it moved higher i thought the trade was to fade the move that was incorrect you pointed out owl the good things in the quarter. Revenue disappointing. I have no idea where the eps came from. Thats taking digging. Interesting to see what they say on the call. The Conference Call is a wildcard i dont necessarily believe the story. But i didnt believe it at 255 either. Good for tesla. This sounds like a great quarter for them id love to see what they have under the hood on the eps number but some the of the epps things that concern me about tesla which makes it a no touch for us is you do have all these dope he were pocketed competitors coming out over the course of the next several months youve got volkswagen set to compete with theodel 3 porsche set to compete with the model s pmt look at netflix as new competitors entered that market i am concerned about the stock in the long run. So, look, im short the stock. Short it around these levels even a little bit higher but i tell what you, the things most important are are really about the cash flow and really about the earnings side. But what is interesting is look the cynic in me said all i heard about was china and this was attention differential where i think they can begin production in china its an exciting market with you we dont have to know whats going on in mcin terms of true demand we can assume its a great place and diverting attention to there is great the profitability is the most important because the Balance Sheet is all i care about. And when they tell you we think well be above 360,000 in terms of deliveries that means the Fourth Quarter is a record quarter. Nothing they have been close to doing based upon the numbers we in so far year to date which is extraordinary im cynical on that the thing about the profitability, you have to remember, is they are cutting cap ex, op exdoing everything they can and did a mini structuring in most of the 2019. When you cut that you should be more cash flow positive. Can you really grow in an environment if this is a growth story . But right now the numbers that im looking at, theyve answered a lot of questions and i have not changed my view. Skeptics abound on this desk pete. I understand which there are concept iks and it makes sense because weve been promised a lot of things. Weve had delivery numbers out in the sky that didnt occur can they actually get to the numbers . Guy the one thing i push become a little bit was disappointing in terms of revenue pretty close to in line the it missed but close. I thought that was interesting i think also the possibility of what might exist, tim on terms of the china production thats sort of stood out when phil was talk bag thats begun and could go forward and could they actually take market share over there where plenty of ev competition i think there is a lot of interesting things about this right now. The cash and cash live equivalent you brought that up mel process. We always look at that and it seems that number is not bad. There is not a lot of great things but id say there is a lot of nod not so bad and pretty good but can they continue to deliver. Delivering the 360 plus vehicles but right now squl highly confident. You got to be impressed too with if you expect about 18 and theyre delivering 22 plus in terms of the margin and maybe thats a projection towards 25 , thats going to be pret dwr interesting. I know these are all numbers we look at and say, sort of scratch your head how real that he feel sometimes with you the numbers we look at are the numbers we have to deal with and thats why we see the huge spike in the stock. Up 14 more reaction to the results. Luke ventures founder gene munster why do you think the stock is up so much . Melissa this is a great quarter for them i reluctantly use the word great because i think its such an emotional stock one way or the other and i dont want to pick sides and i want to stay straight and nay narrow down the road specifically in hindsight they kind of told us this would happen in the june letter. Theyve been recognizing some revenue from the deferred component. Thats probably the biggest missing piece between the revenue fractional miss and strong earnings. They have 880 million in deferred revenue last your theyve 370 million recognized over the last year pu the increment thele piece we learned from the letter they put out was they still have nearly 500 million to recognize Going Forward. And so what that probably means is a portion of in upside in earnings maybe considered a third or half of it was related to deferred essentially 100 margin revenue that came from the full selfdriving feature theyve been selling the reason why that is an important factor in this is this when you think about the quarter relative to the tesla story, is that the deliveries have been moving in the right direction. Im surprised at the guidance calling for more than 100 probably in 510,000 vehicles in the deasy. But the earnings fees, the ability to shave off this deferred income, makes is more easy for the company to essentially improve that earnings piece, which obviously has been one of the negatives around the story and they can sustain that. That 570 million they could take piece fs of that over the next two years. This whole idea we are a quarter away from things collapsing, i think that story took a step back overall story took a step forward today. Nerms of the other items, what phil and i were talking about or all of the shanghai pictures, the shanghai gigafactory looks like its ahead of the schedule according to the news letter look at the pictures, gene how big of the bull story is that how big of the 14 rise in the after hours is shanghai . I think its a small part of it i think the big are part is the earnings piece and you can see some of the leverage how they pull off the deferred and the impact on eps i think thats the biggest piece. Shanghai is important. In context, its 15 of tesla sales from china thats at products essentially 20 to 40 more expensive because of tariffs some of those, not all will be eliminated so opens up this big market for dsh from a logistics standpoint and cars being made more affordable my guess is the guidance, the delivery guidance for december assumes that havent had a chance to go through the whole release. But assumes that they are going to be delivering some cars into that big market. Thats an important factor i would put that number two behind the earnings and the importance of the call tonight gene, its tim. Lets talk about the profitability. I think youre getting at with the deferred revenue ability to have flexibility in the numbers. Because the kuchgs for me is Second Quarter was record numbers and record cash burn and a major loss and you had dynamic where we really didnt see any improvement. And in fact the revenue mix for the three versus the x and the s has been leading to less profitability. Those other cars with cash cows and the revenue mix has them at 20 of the overall revenue how is margin Getting Better here im very confused. So in the june quarter the margins were negatively impacted especially on the s and x which had impact on the overall marmons because essentially they have the new model, the raven model is coming out. They are discounting some of the old models that had negative impact on selling price and margin too i think that probably has played that dynamic are dynamic about what happened in june has played an impact in some of the movement back. I also think that the reasons why margin move higher is there is some form of efficiencies that they are gaining. A year ago there was a lot of focused on ability to actually manufacture. While its far from perfect everybody i think they made improvements that impacted margin and the last piece talking about deferred income piece. A unique aspect to the tesla story. No other car company has the model where they can upset a 5,000 features thats pure margin and that impacts margin. Thanks, gene, before we let gou, professor munster. We have a class. On the quarter. Grade on the quarter. I give it a minus with elon involved, he is so polarizing i need to apologize for getting a grade that starts with this. Buts in a good yup they show they can continue to grow the indemand question is not as significant. And on the profitability side i think there was a measurable step forward here. As someone short the stock i would be ienl not short but if i was short, i would be concerned at their ability to keep turning the screws down and in the quarters to come. Gene, thanks. Gene munster a minus on the request are after hour sessions highs up towards 18 . Some of the other headlines i dont think we verbalized but come out in the shareholder letter the model y is ahead of scheduled production expected by summer of 2020 positive nap gap netting income goog foortd positive Free Cash FlowGoing Forward as well quickly guy on the move. Again, i start by the way i finished the last time i spoke, that the huge Short Interest i thought majority of the shorts covered into the quarter i was wrong. I think thats what you see now. Im not suggest a lot of it could be machine driven as well and pete can speak to that its a staggering moving on the back of a good quarter but again i think you have to wait and hear what they have to say at 6 00 when we go off air anything can happen on the Conference Call. Looks great now things can change quickly. Up towards levels we have not seen since march we actually broke the 300 level. This is something well watch throughout the after hours session. Meantime another big name ever a the bell microsoft be, the stock volatile after earnings josh lipton in san francisco. Bottom and top one other number the azure Revenue Growth 59 . A deacceleration sequentially in year over year of course plenty of folks on the street looking for the deacceleration in part they say the law of large numbers kicking in another thing to point out cloud revenue azure dynamics 365 other Cloud Properties 11. 6 billion in the quarter. Gross margin 66 i did catch up with kirk ma tern at ever core isi to get his take on the quarter kirk argues microsoft keeps delivering against High Expectations a metric he points out commercial booking up 35 kirk said an incredible number given microsoft size and scale the growth in the cloud he says now translating into real earnings power he says that drives the stock higher over the longest. While the stock isnt doing much in the after hours kirk saying listen its well liked a and well owned stock and this quarter good in his opinion. Waiteding for guidance the call at 5 30 eernt. Well check back in when the call gets under way. Turning to you pete on microsoft. The they are crushing into the number absolutely. Thats something he touched on there. Lets look at deeper, gaming and other categories where they are winning and continuing to show us growth, mel there is a lot of reasons to like the quarter you can understand why its probably not popping, though and i think the guidance is going to be the real key what are they able to tell us next whats next . Thats what everybody cares about. They already kept the stock where it is because of this big run up because of everything they delivered but now its about whats next. And can they actually give us even more if if they can this is a stock that easily could be 150 stock in a short period of time. Lets play choose your own adventure. What game. Is that new bear with me if they give guidance thats right in line with consensus what does the stock do is that me or tim. Goes down my adventure is down taking the roller coaster down here is the issue with microsoft. And pete articulated this well i mean the expectations are high but meanwhile you basically between ibm and red hat mergen and workday you had a lot of negativity around cloud and cloud margin and cloud growth for people that counted on cloud. No one counted more than microsoft. And the question is in a world where cloud spend is three times of i. T. In the next five years how commodity advertised and crowded is it . I think microsoft struggled with that timothy dont strug. Le on execution. Each of the xenoen are 11 billiondollar revenue businesses you like software, right. We like microsoft and own microsoft. You know one of the issues is this stock is up 35 year to date almost double the performance of the s p 500 there is obviously execution risk and they did well beat on the top line beat on the bottom line. The only issue is azure has slowed so it was 64 last quarter down to 59 this quarter. The street expecting 62 but there is nothing to be worried about here longterm right now, theyre the number two player in cloud. I think theyre going to overtake amazon over the next few years. There is a lot of legacy internal i. T. Within businesses. And there is definitely a need for their hybrid solution. Look, again, this last year this this quarter 76 growths in azure. 59 now still 59 is significant three business units, to tims point all basically 11 billion. Its crazy. Quickly operating margin talk about that quick. 38. 5 . The street looking for 35. 3 thats significant of a business of that size when you see operating margin growth to me in that magnitude i think it offsets the slowdown in aand your so the fact that the stock is not lowered to me says you know, i think its actually a very good quarter going higher from here. Is that your adventure by the way. She didnt ask me to choose. I only asked you. You or. Love the fact that i was the only one entitleding to on the adventure. There is time to ask others Conference Call in 12 minutes. Meantime guidance give opinion president Mark Zuckerberg grilled on capitol hill. We break down the highlights of the heated testimony tell what you it means for facebook and big tech later here from jonathan government lub why he sees another market rally on the horizon. Live from timesqres ua in new york city. Much more fast money right after this to the wait did frowe just winners. Prouders everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. Welcome back to fast money. Facebook ceo Mark Zuckerberg wrapping up testimony on capitol hill lets get to ylan mui live in washington with the highlights hey, ylan. Reporter melissa, the hearing six hours long, covering a lot of ground. But the focus on Libra Zuckerberg tried to frame it as a way to ensure that america remains the leader in Global Financial innovation and not china. I think our surely risks if if a chinese Financial System becomes the standard in more countries because then it would be very difficult if not impossible to impose our sanctions or the kinds of protections that that i think we are right to want to have oversight around the world. Now, zuckerberg did promise lawmakers that he would not move forward with libra if he doesnt get approval from u. S. Regulators he also said he would be willing to leave the Libra Association but despite the six hours of testimony it doesnt look like he has changed any mindsious jet. Committee chairwoman Maxine Waters says she spoke privately with zuckerberg after the hearing for a few minutes but ca