Tesla results: Margins recover, operating profit falls 56%
Tesla posted third-quarter revenue of $28.05 billion, flat from a year earlier. Net income fell 43% as research and development spending rose sharply.
Archive image · Photo: Larry D. Moore / Wikimedia Commons, CC BY 4.0 (cropped and resized)
Tesla reported third-quarter 2026 results on Oct. 21. Revenue was $28.05 billion, in line with the year-earlier $28.10 billion. The automotive business brought in $20.56 billion, down from $21.21 billion a year earlier. Net income under U.S. accounting rules fell to $787 million from $1.37 billion. Adjusted earnings were 48 cents per share, above the 45 cents analysts had expected, according to Electrek.
Gross margin rose to 19.6% from 18.0% a year earlier, Electrek reported, while automotive gross margin excluding regulatory credits was 18.1%. Operating income, however, fell 56% to $718 million, for an operating margin of 2.6%. The reason was sharply higher costs: operating expenses rose 39%, and research and development spending climbed 69% to $2.76 billion. Sales of regulatory credits to other automakers brought in only $113 million, down 73%.
"Battery availability continued to be the limiting factor in increasing auto volumes in the quarter," Tesla said. At the same time, the company reported "the largest backlog for our passenger vehicles in four years." Tesla said production of the updated Semi truck has begun in Nevada. Capital spending rose to $4.73 billion, free cash flow was $1.53 billion, and cash and investments stood at $45.4 billion.