Tesla Reports Record Q3 Revenue but Profit Misses Estimates Amid Tariffs and Rising Costs

Tesla (NASDAQ: TSLA) posted record third-quarter revenue that surpassed Wall Street forecasts, driven by strong electric vehicle (EV) sales as U.S. consumers rushed to take advantage of expiring federal tax credits. The EV giant reported revenue of $28.1 billion, exceeding analysts’ expectations of $26.37 billion, according to LSEG data.

However, Tesla’s earnings per share came in at $0.50, missing the estimated $0.55, as profit margins were pressured by tariffs, rising research and development (R&D) expenses, and reduced income from regulatory credits. The company’s gross margin stood at 18%, slightly above projections, but its automotive margin excluding credits slipped to 15.4%. Shares of Tesla fell 4% in after-hours trading following the announcement.

Chief Financial Officer Vaibhav Taneja noted that U.S. tariffs on imported auto parts cost Tesla more than $400 million during the quarter. Operating expenses surged 50% year-over-year due to growing investment in AI, robotics, and other R&D initiatives, along with increased stock-based compensation. Tesla anticipates capital expenditures will rise significantly in 2026 as it expands development of new products including the Cybercab robotaxi, Semi truck, and Megapack 3 battery.

To offset weakening demand amid the expiration of EV tax credits, Tesla launched lower-cost “Standard” versions of its Model 3 and Model Y, trimming prices by about $5,000 to $5,500. While aimed at boosting sales volume, analysts warn this strategy could further pressure margins.

Tesla’s energy division remained a bright spot, with an 81% increase in storage deployments. CEO Elon Musk reaffirmed the company’s push toward autonomous driving, predicting robotaxi expansion across major U.S. cities by year-end.

Despite record sales, analysts expect Tesla’s 2025 deliveries to decline 8.5%, citing the end of tax incentives, rising competition, and waning demand for its older models.