Tesla (TSLA) Q3 2025 Earnings

Tesla (TSLA) reported a 12% increase in third-quarter revenue on Wednesday, a welcome rebound after two consecutive quarters of declines. Despite the revenue beat, earnings fell short of analyst expectations, triggering a nearly 5% drop in after-hours trading. Investors are scrutinizing Tesla’s capacity to sustain growth amidst escalating operational costs and evolving market dynamics.

Here’s a closer look at the key metrics compared to LSEG analyst consensus:

• Earnings per share: 50 cents adjusted vs. 54 cents estimated
• Revenue: $28.10 billion vs. $26.37 billion estimated

Total revenue surged from $25.18 billion in the same period last year. Automotive revenue, the company’s core business, experienced a 6% increase, reaching $21.2 billion compared to $20 billion a year ago, according to Tesla’s official statement.

However, net income painted a less optimistic picture, plummeting 37% to $1.37 billion, or 39 cents per share, from $2.17 billion, or 62 cents per share, in the prior year. This significant dip in profitability is attributed to aggressive price reductions on Tesla’s EV models and a substantial 50% surge in operating expenses. The company cited investments in artificial intelligence and “other R&D projects” as primary drivers of the increased spending.

Adding to the complexity, the quarter’s end coincided with the expiration of federal tax credits for electric vehicles, a consequence of prior legislative action. This deadline likely spurred a temporary surge in demand as consumers rushed to capitalize on the incentives before they vanished, potentially skewing the quarter’s sales figures.

During Tesla’s previous earnings call in July, CEO Elon Musk and CFO Vaibhav Taneja cautioned shareholders about the looming impact of elevated tariff costs and the anticipated expiration of these critical tax credits.

Revenue from automotive regulatory credits experienced a sharp decline of 44%, falling to $417 million from $739 million, signaling a potential headwind for future profitability.

Despite the overall revenue growth, Tesla faced a persistent sales slump in Europe during the third quarter. This decline is believed to stem from a combination of factors including consumer apprehension related to Musk’s increasingly polarizing public persona and political statements, coupled with intensifying competition from established EV manufacturers like Volkswagen and rapidly emerging players such as BYD.

While the stock has recovered from a challenging start to the year, it’s up almost 9% in 2025, still trailing major market indexes and the majority of its megacap peers, indicating ongoing investor uncertainty.

The stock experienced further pressure during the earnings call as executives offered limited concrete guidance, with Musk primarily focusing on long-term, aspirational visions. Investors are particularly concerned about the relatively slow progress of Tesla’s Full Self-Driving (FSD) system. Taneja revealed that only 12% of Tesla’s current fleet has customers subscribing to FSD Supervised, highlighting the challenge of monetizing this key technology.

Tesla refrained from providing specific volume guidance in its shareholder report or on the earnings call. The company reiterated its ambition to commence “volume production” of the Cybercab, heavy-duty electric Semi trucks, and its new Megapack 3 battery energy storage system in 2026. Musk indicated that Cybercab production is anticipated to begin in the second quarter.

The company also announced the establishment of “first-generation production lines” for its humanoid Optimus robots, with Musk stating that Tesla expects to unveil Optimus V3 in the first quarter. This timeline underscores Tesla’s commitment to robotics and its potential future impact on manufacturing and other industries.

Tesla initially unveiled its fully electric Semi in November 2017. While some units have been delivered to early customers, Semi production lines remain “under construction,” suggesting ongoing challenges in scaling production of this long-awaited vehicle.

Tesla VP Lars Moravy indicated that production lines are being built out, equipment is still being installed, and a fleet of validation trucks is undergoing testing. However, the development of a version of Tesla’s partially automated driving systems for the Semi is still underway, further complicating the timeline.

Instead of committing to specific delivery targets for EVs and energy products, Tesla acknowledged the uncertainty stemming from “shifting global trade and fiscal policies on the automotive and energy supply chains, our cost structure and demand for durable goods and related services.” This cautious statement reflects the volatile global economic landscape and its potential impact on Tesla’s operations.

The company reported growth in its “service area and fleet count” for its Robotaxi service in Austin, where safety drivers are currently present, and the launch of its Bay Area ride-hailing service. The company is collecting data aimed at facilitating rapid scaling to other cities using a “universal model.”

Musk stated that Tesla expects to remove the human safety drivers from its Austin Robotaxi vehicles this year and have the service operational in eight to 10 metro areas by the end of 2025. New markets will initially feature safety drivers for at least three months.

Earlier in the month, Tesla released delivery figures of 497,099 vehicles for the third quarter, a record figure, on total production of 447,450 vehicles. However, deliveries for the first three quarters of the year stood at around 1.2 million, down about 6% compared to the same period in 2024.

Tesla also debuted more affordable versions of its popular Model Y SUV and Model 3 sedan in early October. The company stated that the new offerings make “our products more accessible to customers in the wake of the expiration of the EV tax credit in the U.S.”, attempting to offset the reduced consumer incentives.

The company’s energy generation and storage business emerged as a key growth driver, with revenue surging 44% to $3.42 billion. Tesla’s energy products encompass large backup batteries and solar photovoltaics capable of powering data centers and other large facilities. Tesla’s energy business now accounts for approximately one-quarter of its overall revenue, highlighting its growing strategic importance.

Musk’s AI startup xAI, founded in 2023, has become a significant consumer of Tesla’s energy products. In its 2024 annual report, Tesla disclosed that xAI incurred expenses of roughly $198.3 million for the year and $36.9 million through February of 2025, primarily for Tesla’s Megapack products. This demonstrates the synergies between Musk’s ventures and the potential for internal demand to drive growth.

Notably, Investor Relations head Travis Axelrod twice declined to address shareholder questions pertaining to future products during the call, stating in one instance that “this is not the appropriate venue to cover that.” This reluctance to discuss future product plans suggests a possible strategy to manage expectations and avoid competitive disclosures.