Tesla posts record sales but profits fall short
Rising costs and narrower margins weigh on earnings despite delivery surge
Tesla reported record third-quarter vehicle sales but missed profit expectations as rising costs and narrower margins weighed on earnings. The automaker posted revenue of $28.1 billion, a 12% year-on-year increase driven by nearly half a million vehicle deliveries—the highest quarterly total in its history—boosted in part by U.S. buyers rushing to claim an expiring tax credit.
Net income fell more than 25% to $2.1 billion, with earnings per share of $0.50 below analysts’ $0.55 estimate; shares slipped about 4% in after-hours trading. Operating margins narrowed to 5.8%, the weakest since early 2020, as Tesla absorbed higher component and shipping costs, paid over $400 million in tariffs on auto parts, and saw income from regulatory credits decline sharply (from $739 million a year earlier to $417 million this quarter). Heavy spending on R&D and ramp-up costs for new programs—robotaxi and Optimus humanoid robots—also weighed on profitability.
To counter anticipated cooling demand after tax credits ended, Tesla introduced lower-cost Model Y and Model 3 variants, cutting prices by roughly $5,000–$5,500 and trimming features; analysts warned those moves could further compress margins. Tesla’s energy and storage businesses grew about 32% year-on-year, with Megapack deliveries hitting a quarterly record and helping offset vehicle margin pressure.
CEO Elon Musk emphasized a strategic shift toward AI-driven mobility services, asserting that robotaxis and autonomous platforms—pilot production of a next-generation vehicle is slated to start at the Texas Gigafactory late this year—will transform Tesla’s financial profile by end-2026. The company reaffirmed full-year delivery guidance near 1.9 million vehicles and expects production costs to stabilize next quarter.
Investors remain cautious: despite the sales surge and a market valuation near $1.45 trillion fueled by enthusiasm for Musk’s AI and robotics ambitions, Tesla faces a near-term squeeze from price competition, the end of generous U.S. tax incentives, reduced regulatory credit revenues, and elevated costs tied to tariffs and technology investments.
