By Hamza Faisal
Tesla just handed Wall Street the two things it was watching for — and one thing it wasn't. Third-quarter revenue landed at $28.046 billion, essentially flat from a year ago but ahead of the $27.9 billion consensus, while automotive gross margin excluding regulatory credits snapped back to 18.1%, up from 15.4% a year earlier and 16.3% last quarter. The stock ticked up 2% after hours before settling around 1.3% higher at $391.57.
The rebound in margins is the real story of the quarter. Tesla delivered 486,532 vehicles, down 2% year over year and almost exactly the 486,500 it had guided, while production rose 4% to 464,391. Management blamed battery availability — not demand — for capping volumes, saying the company ended the quarter with its largest vehicle order backlog in four years.
Profit still got cut in half
The margin recovery didn't save the bottom line. Operating income plunged 56% to $718 million for a razor-thin 2.6% operating margin, as operating expenses jumped roughly 39% on higher R&D spending. GAAP earnings came in at $0.22 per share, down 44% from a year ago, though non-GAAP EPS of $0.48 beat the $0.43 analysts expected. Regulatory credit revenue — once a reliable profit cushion — collapsed to $113 million from $417 million a year earlier.
Energy was a mixed bag: storage deployments grew 10% to 13.7 GWh with record order intake, but energy revenue fell 16% to $2.881 billion. The bright spot was services, where revenue jumped 33% to $4.605 billion and gross profit hit a record $734 million on supercharging, insurance, and parts.
Robotaxi crosses 2 million miles
The autonomy numbers did the heavy lifting on the call. More than 75% of new North American deliveries signed up for Full Self-Driving, up nearly 20 points from last quarter, and active FSD subscriptions reached 1.74 million, up 67% year over year. The robotaxi service hit nearly 2 million cumulative unsupervised miles, with Cybercab now deployed into the Austin fleet and operating hours stretched from 6am to midnight.
Tesla also confirmed it has begun volume production of the Semi and started building Optimus humanoids in Fremont. Management expects robotaxi revenue to become noticeable in the second quarter of next year — the moment this whole story either pays off or doesn't.
Batteries, not buyers, are the bottleneck
Perhaps the most telling line of the quarter: Tesla says it can't build cars fast enough, not that it can't sell them. Whether that backlog converts to deliveries depends on battery supply unlocking — and whether the robotaxi ramp, not the car business, becomes the growth engine from here.
By Hamza Faisal
