Tesla’s quarterly profit dropped by nearly a third even as the company reported record sales, underscoring the financial strain of Elon Musk’s strategic shift toward robotics and artificial intelligence.
The electric carmaker said adjusted net income for the third quarter fell 29% year-on-year to $1.8 billion, below analyst expectations of $1.9 billion.
Reported net income came in at $1.4 billion, also missing forecasts.
The decline was driven by soaring operating costs and a sharp fall in emissions credit revenue, which has traditionally bolstered Tesla’s earnings.
Revenue up 12%
Revenue, however, rose 12% to $28.1 billion, exceeding market estimates of $26.6 billion.
Tesla delivered a record 497,099 vehicles in the three months to the end of September, up from 462,890 a year earlier.
Sales were boosted by a rush of US customers seeking to take advantage of a $7,500 federal tax credit, which expired on September 30.
Still, the company’s margins were squeezed as income from regulatory credit trading plunged 44% to $417 million.
The drop followed a US government decision to reduce penalties for carmakers that miss emissions targets to zero — effectively dismantling the once-lucrative market for carbon credits.
Tesla had made $2.8 billion from credit trading last year, about three-quarters of it in the US, providing an important buffer to profitability.
Without it, Musk’s push into new technologies has become more visible on the balance sheet.
Operating expenses surge
Operating expenses surged 50% to $3.4 billion, driven by Tesla’s heavy investment in chips and infrastructure to support its ambitions in AI, autonomous vehicles, and humanoid robots.
Musk has described these areas as central to Tesla’s future, positioning the company as a leader in robotics and automation rather than purely an automaker.
The company is also navigating political and investor tensions.
Musk at the centre
Musk’s outspoken activism and fraying relationship with US leadership have added to uncertainty.
Meanwhile, Tesla is lobbying shareholders ahead of its November 6 annual meeting, where investors will vote on a $1 trillion compensation package for Musk.
Proxy advisers ISS and Glass Lewis have urged shareholders to reject the proposal, citing its extraordinary scale and a lack of safeguards to ensure Musk’s focus on Tesla as he manages ventures from SpaceX to xAI.
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