Tesla profits dip despite margin gains in latest report

The electric vehicle market remains a focal point for investors in the Northeast. Tesla released its third quarter results after the market closed on Tuesday.

Revenue stayed flat at 28.05 billion dollars. This figure matches the 28.06 billion dollars that analysts expected. Non-GAAP earnings per share came in at 48 cents. That beats the 45 cent consensus estimate. However, the figure is down 4 percent from the same period last year.

The company posted 718 million dollars in operating income. That is a 56 percent drop compared to the previous year. The operating margin stands at 2.6 percent. This is better than the 1.4 percent seen in the second quarter. It remains well below the 5.8 percent recorded a year ago. Total gross margin improved to 19.6 percent. This is up from 18.0 percent in the prior year.

Spending is the main driver of the lower profit. Operating expenses rose 39 percent to 4.78 billion dollars. Research and development costs jumped 69 percent to 2.76 billion dollars. Tesla is funding projects for its Super Intelligence system, the Optimus robot, and the Cybercab. Stock-based compensation also increased significantly. It hit 1.17 billion dollars, up from 663 million dollars a year ago.

Capital spending reached 4.73 billion dollars. This is more than double the amount spent in the same quarter last year. Free cash flow was 1.53 billion dollars. Tesla ended the quarter with 45.4 billion dollars in cash and investments. GAAP net income fell 43 percent to 787 million dollars. This included a 288 million dollar gain from bitcoin holdings.

Automotive gross margin excluding credits rose to 18.1 percent. This is up from 16.3 percent in the second quarter. Tesla cites a better product mix and more FSD subscription revenue. Regulatory credits brought in only 113 million dollars. That is down 73 percent from a year ago. The energy segment saw revenue fall 16 percent to 2.88 billion dollars. This was partly due to tariff-related refunds to customers.

Services and other revenue grew 33 percent to 4.61 billion dollars. Gross profit in this area hit a record 734 million dollars. Tesla says battery availability limited vehicle production this quarter. The company ended the period with its largest passenger vehicle backlog in four years. Active FSD subscriptions reached 1.74 million. The Robotaxi service logged nearly 2 million unsupervised miles.

The company has spent 13.01 billion dollars on capital projects in the first nine months of 2026. Management guided for more than 25 billion dollars for the full year. Tesla would need to spend roughly 12 billion dollars in the fourth quarter to meet that target. The shareholder letter did not update this guidance. Management will discuss these figures on a conference call scheduled for 5:30 p.m. ET.