Tesla’s Q3 results reveal more EVs sold, but profit dips

Tesla's financial results for the third quarter of 2025 are in, and the numbers tell a confusing story. The company set a new record for revenue, pulling in $28.1 billion. It also managed to deliver 497,099 vehicles to customers. And yet, despite selling more EVs than ever, the profits took a major hit. Investors were clearly not impressed, and the stock price fell almost 5% in after-hours trading.

The big question is: how does a company make more money but keep less of it? Tesla's net income, or its final profit, fell 37% compared to last year, dropping to $1.37 billion. Its operating income, the profit from its main business, fell even further, down 40%. The problem is in the company's profit margins. Tesla's gross margin shrank from 19.8% last year to 18%, meaning the company is making less money on each car it sells.

There are a few reasons for this profit squeeze. To keep sales high, Tesla has been cutting prices on its popular Model Y and Model 3 vehicles. At the same time, its costs went up. The company said its operating expenses jumped 50%, partly to pay for research into artificial intelligence and other R&D projects. At the same time, a reliable source of cash shrank - revenue from "regulatory credits," which Tesla sells to other automakers, fell 44% to $417 million.

That record $28.1 billion in revenue also came with a catch. A major US federal tax credit for electric cars expired at the end of the quarter. This caused a rush of buyers who wanted to purchase a Tesla before the incentive disappeared. This pulled the sales forward, making the quarter look unusually strong and masking some challenges. Tesla is facing a sales slump in Europe, where it faces tough competition from companies like Volkswagen and Chinese EV maker BYD.

When investors asked for a forecast for the rest of the year, Tesla executives offered very little solid guidance. Instead, CEO Elon Musk focused on his grand, futuristic visions. He said the company is still aiming for "volume production" of the Tesla Semi truck and the new Cybercab in 2026.

The Semi truck was first unveiled back in 2017. Executives say validation trucks are on the road, but they are still developing an automated driving system for them. Musk also expects to show off the Optimus V3 humanoid robot in the first quarter of 2026.

Musk did give some new timelines for his Robotaxi ambitions. He said he expects Tesla to remove the human safety drivers from its test vehicles in Austin, Texas, this year. He also wants to have the ride-hailing service operating in eight to 10 major cities by the end of 2025. This project, however, depends on the company's Full Self-Driving (FSD) system. Progress on FSD has been slow. The company revealed that only 12% of its current fleet owners are paying for the "FSD Supervised" system.

All eyes were on the electric cars, but Tesla's energy business was the quarter's real star. The division, which sells large Megapack batteries and solar systems, saw its revenue jump 44% to $3.4 billion. This business now makes up about one-quarter of Tesla's total revenue.

In fact, Musk's other company, xAI, has been a major customer of Megapack products. This energy growth is a major bright spot, especially since Tesla's total vehicle deliveries for the first nine months of 2025, at 1.2 million, are actually down 6% compared to the same period in 2024.

Despite the lower profits, Tesla is not short on cash with $41.6 billion at its disposal. The company also reported that its spending on new factories and equipment was down, flying in the face of some claims that profits are only down because the company is investing heavily in the future. For now, Tesla is as it always was - a company of contrasts: selling more EVs for less profit, and promising a future filled with robots and robotaxis.

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