Tesla profits miss expectations despite record sales surge

Tesla has reported record revenue in the third quarter, driven by a significant rush from buyers in the United States aiming to take advantage of expiring electric vehicle tax credits. However, profits for the quarter failed to meet analysts’ forecasts as the electric car maker contended with mounting costs and market headwinds. Profit per share registered at 50 cents, which fell short of the anticipated 55 cents, due mainly to higher tariffs, increased research costs, and a sizeable rise in operating expenses.

The Austin-based company’s revenues for the three months ending September climbed 12 per cent year-on-year to $28.09 billion, exceeding the average market forecast of $26.24 billion. Despite this, shares slipped nearly 1 per cent to $438.97 in after-hours trading, underscoring market caution over Tesla’s profit sustainability.

Growth in sales was fuelled by American consumers hurrying to buy before the $7,500 federal tax credit lapsed in early October. Tesla advised that this surge could precede a pronounced decline in fourth quarter sales. Nearly half of the company’s revenue emanates from US customers.

Gross margin reached 18 per cent, slightly above the consensus estimate of 17.5 per cent, yet the core automotive gross margin excluding regulatory credits stood at 15.4 per cent, just below the anticipated 15.6 per cent. Operating expenses were up by 50 per cent, attributed to intensive investment in artificial intelligence and product research, in addition to rising stock-based compensation and increased tariffs impacting costs per vehicle.

Tesla delivered 497,099 vehicles during the quarter, a substantial increase year-on-year and significantly ahead of Wall Street projections. Despite this, full-year 2025 deliveries are expected to reach approximately 1.61 million, a figure roughly 10 per cent below the current year’s numbers, reflecting a cautionary outlook for the remainder of the year. The firm would need to ship almost 390,000 vehicles in the December quarter to achieve this projection.

Development continues apace on Tesla’s flagship projects, including the Cybercab robotaxi, Semi truck, and Megapack 3 battery, all set to enter volume production in 2026. The recent launch of the self-driving robotaxi service in Austin marks a strategic shift for Tesla as it increasingly pivots towards autonomous technology and away from its traditional car-sales-based model. This transition is at the heart of investor hopes for future growth. The board has slated a shareholder vote in November regarding a new executive award package which, should strict performance targets be met, could grant chief executive Elon Musk a stake valued up to $1 trillion.

While Tesla’s share price has gained nearly 8 per cent this year, headwinds remain as the firm grapples with rising cost pressures and the potential for softer demand in subsequent quarters. As the electric vehicle landscape evolves, all eyes are on Tesla’s efforts to sustain both growth and profitability in an increasingly competitive market.