Tesla Operating Profit Falls 56% as Musk Extends Bets on FSD, Robotaxi and Optimus

Revenue was $28.046 billion, essentially flat from a year earlier, while automotive revenue fell 3% to $20.56 billion and still accounted for more than 70% of the total. Tesla delivered 486,500 vehicles in the quarter, up about 1.3% from the second quarter but down 2.1% from a year earlier, and above analysts' estimate of about 460,000. Model 3 and Model Y deliveries totaled 478,200, more than 98% of the total, while other models fell about 48% to 8,295 as Model S and Model X were phased out.

Tesla said its passenger-vehicle order backlog at the end of the third quarter was the highest in nearly four years, and deliveries in Canada, Australia, Japan and other markets reached records. The company's Shanghai plant wholesale sales hit 95,366 vehicles in September, the highest monthly total this year, with exports up 58% year over year, according to data from the China Passenger Car Association cited in the report. Average selling price was $42,300, down 0.94% year over year and 1.11% from the prior quarter.

Gross profit rose 9% to $5.494 billion and gross margin reached 19.6%, up 1.6 percentage points. Automotive gross margin rose to 18.5%, or 18.1% excluding regulatory credits, compared with 16.3% in the second quarter and 15.4% a year earlier. CFO Vaibhav Taneja attributed the improvement to a higher share of Asia-Pacific deliveries and growing revenue from FSD software subscriptions, QbitAI reported.

FSD had 1.74 million active paid users globally, up 67% from a year earlier and 260,000 from the prior quarter. Tesla had 1.04 million paid FSD users in the third quarter of 2025, meaning it added about 700,000 in a year. Monthly subscriptions exceeded 50% of paid users for the first time, and more than 75% of new vehicles delivered in North America in the quarter came with an FSD subscription, up nearly 20 percentage points from the previous quarter. A New Street analyst estimated FSD annual recurring revenue at close to $1 billion, a direction Taneja acknowledged.

Operating expenses rose 39% to $4.776 billion. Research and development spending jumped about 69% to $2.761 billion, and selling, general and administrative costs rose 29%. Gross profit increased by $440 million, while operating expenses increased by $1.346 billion. Tesla cited higher spending on AI and superintelligence projects, stock-based compensation and sales costs, along with lower regulatory credit revenue and lower energy gross profit. Net income attributable to common shareholders fell 43% to $787 million; adjusted net income fell 4% to $1.697 billion. The difference reflected items including stock compensation, changes in investment fair value and a $142 million unrealized valuation loss on Tesla's SpaceX stake.

Energy storage deployments reached 13.7 GWh, up about 10% and the second-highest quarterly level, but energy revenue fell 16% to $2.881 billion because of tariff-related customer refunds. Energy gross margin rose to 33.1% from 20.4% in the prior quarter, helped by tariff rebates and lower warranty provisions after cell-cost adjustments. Musk said 2027 Megapack capacity is almost fully booked and that Tesla has started production at its Texas Megafactory, which is planned for 50 GWh of annual capacity.

On autonomous driving, Tesla said it has a lead in FSD "that other Chinese OEMs do not currently have" and is pushing for broader permission to offer the software in China. The report said Chinese automakers are increasingly offering urban NOA and other advanced driver-assistance features in lower-priced vehicles, tying software competition to vehicle sales. Tesla AI Vice President Ashok said the company is developing an AI-driven map and navigation system that will integrate with voice interaction and learn driver preferences. FSD V15 is due to add new start-and-end point handling before expanding to parking and destination recognition in later months.

Robotaxi vehicles had accumulated nearly 2 million unsupervised miles, about 3.22 million kilometers, by the end of the quarter, roughly eight times the prior quarter. Tesla said Cybercab began operating in Austin in early September and its fleet grew about tenfold in a month. Taneja set a target of reducing Robotaxi operating cost to about 30 cents per paid mile. Tesla aims to let the first private vehicles join the Robotaxi fleet around the second quarter of 2027, subject to geofencing, fleet management and regulatory approval.

Optimus humanoid robots entered early production at Fremont, with the first units meeting production-quality standards, and manufacturing space previously used for Model S and Model X is being shifted to the robot business. Musk said most equipment for a million-unit line has been installed, but reaching about 20,000 robots a week will take at least a year or longer. Tesla plans to build 10,000 to 20,000 Optimus robots for internal use in its Optimus Academy to collect real-world training data, integrate its AI5 chip around April 2027 and begin deliveries to external customers around the end of 2027, starting with industrial uses.

Tesla is also building a research wafer fab in Austin, with equipment commissioning planned for the first half of 2027 and first test chips targeted for midyear. The larger Terafab project points to 2028 and would require tens of billions of dollars in capital equipment investment, with long-term scale potentially exceeding $100 billion, according to the report. Musk declined to discuss a possible merger between SpaceX and Tesla, saying only: "That is tap dancing in a minefield."

Editor's Summary

Tesla's third-quarter operating profit fell 56% as higher research, AI and selling costs offset improved automotive gross margin. The company is betting on FSD subscriptions, Robotaxi expansion, Optimus production and chip manufacturing while trying to turn those plans into revenue. After-hours shares fell more than 4.5%, reflecting investor concern about profitability.