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Tesla posted record third-quarter revenue as buyers rushed ahead of the tax credit expiry in September. Despite a 12% rise in sales, Tesla’s profits declined sharply, pressured by higher tariffs, increased research and development (R&D) costs, and fading regulatory credit income, following recent policy changes under the Trump administration.
Tesla reported $28.1 billion in revenue for the third quarter, exceeding Wall Street’s estimate of $26.4 billion. This marks a return to top-line growth after two consecutive quarters of declines, highlighting strong demand in the run-up to the expiration of U.S. federal EV tax credits.
However, earnings came in light at $0.50 per share (non-GAAP), below consensus estimates of $0.55. Net income plunged 37% year-over-year to $1.37 billion, reflecting lower EV prices and rising operating costs.
While record deliveries of 497,099 vehicles fuelled headline revenue, Tesla’s operating income fell 40% compared to last year, weighed by shrinking gross margins (18% vs. 19.8% YoY) and higher R&D spending tied to AI and automation projects.
Automotive regulatory credit revenue dropped to $417 million in the quarter, down from $739 million a year earlier and $435 million in the previous quarter, eroding one of Tesla’s once-reliable profit source. 1
The quarter’s record deliveries were largely driven by a temporary demand surge in the U.S., as consumers rushed to purchase electric vehicles before the federal EV tax credit expired under the Trump administration’s spending bill.
This one-off catalyst helped Tesla post its best-ever quarterly deliveries, but demand could soften in the coming quarters. With Europe facing a sales slowdown, exacerbated by increased competition and public backlash against Musk’s political rhetoric, maintaining volume growth could be a challenge.
Tesla’s aggressive price cuts aimed at boosting sales have eroded profitability and the company’s automotive gross margin continues to slide.
Tesla reported a broad rise in expenses, with operating costs up 50% year-over-year, driven by AI and R&D investments, higher stock-based compensation, and increased per-vehicle costs linked to tariffs.
While the automotive segment remains Tesla’s backbone, its energy generation and storage business stood out this quarter. The division recorded 44% revenue growth to $3.42 billion, driven by the success of Megapack energy systems and large-scale deployments for datacentres, including sales to Musk’s AI startup, xAI.
Energy now accounts for around one-quarter of total revenue, signalling Tesla’s gradual transformation into a multi-segment tech-energy company rather than a pure EV play.
Source: Leverage Shares. Holdings of +3x Long Artificial Intelligence ETP.
CEO Elon Musk offered few specifics about production targets, instead emphasizing on long-term visions. While investors were looking for near-term visibility, Tesla provided cautious commentary and limited forward guidance.
Tesla has staged an impressive recovery from its April lows, approaching its all-time high of $488.54, which could act as near-term resistance. The stock is up 4% year-on-year, underperforming the broader market and other mega-cap peers, reflecting ongoing investor scepticism about the company’s short-term prospects.
Following the report, Tesla shares dropped as investors focused on margin compression and a lack of clear forward guidance. While there are no immediate signs that the rally from April is reversing, the recent deterioration in the Relative Strength Index (RSI) suggests a potential short-term pullback. A decisive drop below the minor support level of $411.45 would confirm a reversal and could trigger a decline toward $365.00.
Professional investors looking for magnified exposure to Tesla may consider Leverage Shares +3x Long Tesla or -3x Short Tesla ETPs.
Footnotes:
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
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