Tesla posts decline in profit, despite record revenue

Tesla reported a mixed financial performance for the third quarter of 2025, delivering record revenue yet falling short of profit expectations, raising concerns among investors about the company’s future growth trajectory.

The electric vehicle giant posted revenue of $28.1 billion, its highest ever for a quarter, surpassing Wall Street estimates. However, adjusted earnings per share came in at $0.50, down 31 per cent year-over-year and slightly below the consensus forecast of $0.54. Following the announcement, Tesla shares declined about 2-4 per cent in after-hours trading.

Tesla chief Elon Musk, said about the financial results, “It was difficult building this revenue”.

Tesla’s revenue surge was largely driven by record vehicle sales, buoyed earlier in the quarter by a rush to capitalize on the now-expired $7,500 federal EV tax credit. Yet, profitability was pressured by sharply increasing operating expenses, which rose 50 per cent to $3.4 billion. Additionally, the company is grappling with roughly $400 million in tariffs and supply chain disruptions, reflecting broader economic and geopolitical headwinds impacting the auto sector.

Tesla’s revenue growth over the past decade has been extraordinary. From under $1 billion in 2014, the company has steadily increased its top line to reach $28.1 billion in the third quarter of 2025 alone. This rapid expansion highlights Tesla’s successful scaling of vehicle production and sales globally, even as it navigates increasing challenges in costs and competition.

Chief Financial Officer (CFO) Vaibhav Taneja highlighted the challenges posed by intensified competition, particularly from Chinese EV manufacturers, and ongoing fiscal uncertainties. Meanwhile, CEO Elon Musk reiterated Tesla’s ambitious pivot toward artificial intelligence, autonomous driving, and robotics, including expansion plans for its robotaxi service in Austin, Texas. Musk anticipates broadening the robotaxi footprint to up to ten metropolitan areas by year-end, pending regulatory approval.

However, investors expressed disappointment over the limited details shared regarding Tesla’s autonomous technology and robotaxi progress during the earnings call. Questions remain about the timeline and scale of these new ventures, which Musk envisions as central to Tesla’s long-term strategy beyond traditional car sales.

The company also faces pressure on several fronts: Cybertruck sales have declined by 62 per cent compared to last year, and a recall affecting nearly 13,000 vehicles due to a battery defect has raised reliability concerns. Tesla’s efforts to introduce more affordable vehicle models, like the pared-down versions of the Model 3 and Model Y priced under $40,000, have drawn mixed reactions as they compete against aggressively priced Chinese competitors like BYD.

Wall Street analysts remain divided on Tesla’s outlook. Some focused on the transformative potential of AI and robotics, view Tesla as a tech pioneer poised for growth beyond automotive manufacturing. Others urge caution, pointing to uncertainties around vehicle delivery volumes, the pace of autonomous tech adoption, and macroeconomic risks.

Despite these challenges, Tesla’s free cash flow surged to nearly $4 billion, signaling robust operational cash generation. Still, with federal tax credits expired and tariffs impacting margins, the company faces a critical period to sustain momentum in an increasingly competitive global market.