Tesla beat Wall Street’s profit forecast for the third quarter and generated positive free cash flow again, helped by capital spending that came in far below what analysts expected. It also cut its spending plan for 2026, and the shares fell on Thursday.
Adjusted earnings came to 48 cents a share. Analysts had expected 43 cents, according to LSEG data cited by CNBC. Revenue of $28.05 billion was roughly flat with a year earlier. That topped the LSEG estimate of $27.9 billion but fell just short of the $28.13 billion Bloomberg consensus, Yahoo Finance reported.
Free cash flow was $1.53 billion, down from $3.99 billion a year ago, after turning negative in the second quarter. Operating income dropped 56% to $718 million as the company spent more on artificial intelligence and robotics, Tesla said in its quarterly update.
Car sales slip, margins widen
Automotive revenue fell 3% to $20.56 billion. Tesla blamed lower average selling prices, fewer deliveries and weaker sales of regulatory credits, which brought in $113 million, down from $417 million.
Each car earned more, though. Automotive gross margin rose to 18.5% from 17.0% a year earlier and 16.9% in the second quarter. Stripping out regulatory credits, it was 18.1%, up from 15.4%. The company credited a better mix of regions and models and higher sales of Full Self-Driving subscriptions.
Deliveries fell 2% to 486,532 vehicles, but that beat the Bloomberg consensus of 463,000, Yahoo Finance reported. Production rose 4% to 464,391. Tesla said battery availability “continued to be the limiting factor in increasing auto volumes.” It ended the quarter with its largest passenger-vehicle order backlog in four years.
| Tesla, Q3 | 2026 | 2025 | Change |
|---|---|---|---|
| Revenue | $28.05 billion | $28.10 billion | 0% |
| Automotive revenue | $20.56 billion | $21.21 billion | -3% |
| Energy revenue | $2.88 billion | $3.42 billion | -16% |
| Services and other revenue | $4.61 billion | $3.48 billion | +33% |
| Automotive gross margin | 18.5% | 17.0% | +1.5 pts |
| Operating income | $718 million | $1.62 billion | -56% |
| Adjusted EPS | $0.48 | $0.50 | -4% |
| GAAP EPS | $0.22 | $0.39 | -44% |
| Free cash flow | $1.53 billion | $3.99 billion | -62% |
| Deliveries | 486,532 | 497,099 | -2% |
| Storage deployed | 13.7 GWh | 12.5 GWh | +10% |
Research spending hits earnings
Operating expenses rose 39% to $4.78 billion. Research and development jumped to $2.76 billion from $1.63 billion as Tesla poured money into AI, which it calls Super Intelligence. Stock-based compensation also climbed, including costs tied to the 2025 CEO Performance Award. Operating margin shrank to 2.6% from 5.8%.
Net income attributable to shareholders fell 43% to $787 million, or 22 cents a share. That figure included a $142 million unrealized loss on Tesla’s stake in SpaceX, which the company leaves out of adjusted earnings.
Capex comes in light
Operating cash flow was $6.26 billion. Capital expenditures more than doubled to $4.73 billion, yet that was still well short of the $7.96 billion analysts had penciled in, according to Yahoo Finance. The consensus had called for free cash flow of negative $4.92 billion. Cash and short-term investments rose $1.9 billion to $45.4 billion.
Tesla now expects to spend about $20 billion on capital projects in 2026, down from more than $25 billion, Reuters reported. Finance chief Vaibhav Taneja told analysts the company was “managing our capital deployment efficiently” and would pay for most of it from operating cash flow.
Chief Executive Elon Musk signaled the spending will pick up later. “I think capex is actually ending up being a little lower than we anticipated, but we’ll start to become more meaningful next year. And then noticeable in the tens of billions in ’28,” he said on the call.
Energy, autonomy and robots
Energy revenue fell 16% to $2.88 billion, partly because of tariff-related refunds to customers. Storage deployments still rose, to 13.7 gigawatt-hours from 12.5. Tesla said it had its “highest-ever order rate and backlog” for storage, and its Megafactory in Texas started production with planned annual capacity of 50 gigawatt-hours. Services and other gross profit hit a record $734 million.
Active Full Self-Driving (Supervised) subscriptions rose to 1.74 million from 1.04 million. The software is now approved in nine European Union countries. Tesla started Robotaxi rides in its Cybercab in Austin on Sept. 3, and the service had logged nearly two million cumulative unsupervised miles by the end of September.
Tesla also began building its Optimus humanoid robot on high-volume lines in Fremont, Calif. The company said it has “proven that the current manufacturing process for Optimus is suitable for a commercial product.” It plans to reach 400 megawatts of AI training compute by year-end.
Shares slip
Tesla shares fell 2% in early trading Thursday, Reuters reported. They had dropped 2.9% to $375.19 after hours on Wednesday, according to Investing.com, and later pared some losses. The stock is down about 14% this year and roughly 23% below its record intraday high of $498.83, set in December, according to Reuters.
“For a stock priced on Cybercab and Optimus, that (capex forecast cut) explains why the shares went nowhere on a result that beat on most measures,” Josh Gilbert, lead analyst at eToro, told Reuters.
What investors are watching
Batteries are still the bottleneck. Investors want to see whether new cell capacity in Nevada and Texas, along with pack capacity in Berlin, lets Tesla work down its order backlog in the fourth quarter.
The smaller 2026 budget also puts the focus on how fast spending on Optimus, Cybercab and AI computing climbs in 2027 and 2028.
Regulators are watching too. The National Highway Traffic Safety Administration has sent Tesla a special order with 21 requests about how it self-certified the Cybercab, and the answers are due Oct. 30, Yahoo Finance reported.
Then there is SpaceX. Musk said Tuesday that both companies had formed special committees to study a possible combination. On Wednesday’s call, he added little: “With regard to a potential merger with SpaceX, I think I said everything that should be said yesterday.”