Tesla's third-quarter operating income falls 56% to $718 million as spending rises; revenue flat at $28 billion

As of 4:26 p.m. ET, Wednesday, Oct. 21, 2026

Tesla reported third-quarter 2026 revenue of $28.05 billion on Wednesday, compared with $28.10 billion a year earlier, and said income from operations fell 56% to $718 million as operating expenses rose, according to its Q3 2026 Update.

Net income attributable to common stockholders was $787 million, or 22 cents a diluted share, on a GAAP basis, down from $1.37 billion, or 39 cents a share, in the third quarter of 2025, Tesla said. On a non-GAAP basis, net income was $1.70 billion, or 48 cents a share, compared with $1.77 billion, or 50 cents a share, a year earlier.

Revenue and profit

Total automotive revenue was $20.56 billion, down 3% from $21.21 billion a year earlier, Tesla said. Energy generation and storage revenue fell 16% to $2.88 billion, and services and other revenue rose 33% to $4.61 billion. Automotive regulatory credit revenue was $113 million, compared with $417 million a year earlier.

Tesla said year-over-year revenue was affected by a "decrease in Energy Generation and Storage, partially due to tariff-related customer refunds," lower vehicle average selling prices, lower regulatory credit revenue and fewer vehicle deliveries, partly offset by growth in services and other, currency effects and higher automotive ancillary sales "primarily driven by an increase in FSD subscriptions."

Total gross profit rose 9% to $5.49 billion, for a GAAP gross margin of 19.6%, up from 18.0%, the company said. Operating expenses rose 39% to $4.78 billion, including research and development spending of $2.76 billion, up from $1.63 billion. The operating margin was 2.6%, compared with 5.8% a year earlier.

Tesla attributed the drop in operating income primarily to an "increase in operating expenses driven by SI and other R&D projects, SBC (including 2025 CEO Performance Award) and SG&A," along with lower regulatory credit revenue and lower energy gross profit. The company uses SI to refer to what it calls Super Intelligence.

Cash

Operating cash flow was $6.26 billion and capital expenditures were $4.73 billion, more than double the $2.25 billion of a year earlier, leaving free cash flow of $1.53 billion, Tesla said. That compares with $3.99 billion of free cash flow in the third quarter of 2025.

Cash, cash equivalents and short-term investments were $45.45 billion at the end of the quarter, a sequential increase of $1.9 billion that Tesla said was "primarily a result of positive free cash flow."

Deliveries, energy storage and products

Tesla said it produced 464,391 vehicles and delivered 486,532 in the quarter, compared with 447,450 produced and 497,099 delivered a year earlier. It deployed 13.7 gigawatt-hours of energy storage, up from 12.5 GWh. Active FSD (Supervised) subscriptions rose to 1.74 million from 1.04 million, the company said.

"We ended the quarter with the largest backlog for our passenger vehicles in four years," Tesla said, adding that "battery availability continued to be the limiting factor in increasing auto volumes in the quarter." It said its energy storage business had its "highest-ever order rate and backlog."

The company said it began volume production of the Tesla Semi in Nevada, started Optimus humanoid robot production on its high-volume lines in Fremont, California, began production at Megafactory Texas and started giving Robotaxi rides in Cybercabs in Austin on Sept. 3. It said it unveiled the next-generation Roadster on Oct. 15 and that FSD (Supervised) attach rates reached "over 75% of new vehicle deliveries in North America."

Tesla said it plans to reach 400 megawatts of SI training compute by the end of the year and plans to start commissioning equipment at its Austin Fab in 2027.

Outlook

Tesla did not give numerical guidance for deliveries or earnings. On volume, it said: "We are focused on maximum capacity utilization at our factories. Deliveries and deployments will be impacted by aggregate demand for our products, supply chain readiness and allocation decisions between sale to customers and use for our owned and operated fleet."

On profit, the company said that "over time, we expect our hardware-related profits to be accompanied by an acceleration of SI, software and fleet-based profits."

Tesla said it would hold a live webcast of its third-quarter results conference call at 4:30 p.m. CT (5:30 p.m. ET) on Wednesday.