Tesla reports steady revenue and higher margins in Q3 2026

Tesla posted third-quarter financial results today that showed a recovery in profitability. The company reported $28.05 billion in revenue, which matched Wall Street expectations. Non-GAAP earnings came in at $0.48 per share. This figure beat the consensus estimate of $0.45 per share. However, the result was still down 4% from the same period last year. The company is working to stabilize its financial footing after a rough second quarter.

The path to this report has been uneven. In the second quarter, operating margin fell to 1.4%. Profit margins have been under pressure as Tesla ramps up spending. The market expected a flat quarter for revenue. Analysts predicted $28.06 billion in sales. They also forecast lower profits due to ongoing cost increases. Investors were watching to see if the profit slide had finally stopped.

Tesla delivered 486,532 vehicles in the third quarter. That number is down 2.1% from last year but ahead of analyst predictions. The company produced 464,391 cars. Energy storage deployments reached 13.7 GWh. This is an increase from 12.5 GWh a year ago but below the 15.9 GWh expected by analysts. The focus shifted from unit volume to financial health. The key question was whether Tesla could improve its margins while investing heavily in future technology.

Margins improved but income fell. Auto gross margin excluding credits returned above 18%. Total gross margin rose to 19.6%, up from 18.0% a year ago. Operating income dropped 56% to $718 million. The operating margin is now 2.6%, down from 5.8% last year. Spending on AI, Optimus, and the Cybercab drove up operating expenses. These costs rose 39% year-over-year to $4.78 billion. Research and development costs jumped 69% to $2.76 billion.

Capital spending remained high. Tesla spent $4.73 billion on capex, more than double the amount from a year ago. Free cash flow was $1.53 billion, down from $3.99 billion in the same period last year. The company holds $45.4 billion in cash and investments. GAAP net income fell 43% to $787 million. This included a $288 million gain on bitcoin holdings. A $142 million loss on SpaceX equity partially offset that gain.

Battery availability continues to limit production. Tesla stated that battery supply was the main constraint on auto volumes. The company ended the quarter with its largest passenger vehicle backlog in four years. Deliveries fell 2% year-over-year. Sales of Cybertruck, Semi, and other models dropped 48%. Inventory levels decreased to 11 days of supply. Average selling prices continued to fall. Active FSD subscriptions reached 1.74 million, a 67% increase. Robotaxi services logged nearly 2 million unsupervised miles.

Energy revenue faced headwinds. Sales in this segment fell 16% to $2.88 billion. The company attributed this to tariff-related customer refunds. Deployments still rose 10% to 13.7 GWh. Energy gross margin improved to 33% from 20% in the second quarter. Services and other revenue grew 33% to $4.61 billion. This segment posted a record gross profit of $734 million. Charging, insurance, and parts sales drove this growth.

Management will discuss these results on a conference call at 5:30 p.m. ET. The full shareholder deck is available on the investor relations site. Tesla has guided for more than $25 billion in capex for the year. It has spent $13.01 billion in the first nine months. This trajectory suggests spending may accelerate in the fourth quarter. The company aims to balance current profitability with long-term growth in autonomy and energy.