Tesla (NASDAQ: TSLA) reported Q3 2025 revenue of $28.1 billion, up 12% year over year, while operating income fell 40% to $1.6 billion, compressing the operating margin to 5.8%.
Segment revenue showed mixed drivers: automotive rose 6% to $21.2 billion, energy generation and storage jumped 44% to $3.4 billion, and services and other increased 25% to $3.5 billion.
Total gross profit inched up 1% to $5.1 billion as gross margin slipped down to 18.0%. Operating expenses climbed 50% to $3.43 billion, which pushed income from operations down despite higher volumes. Management cited higher operating costs, increased stock-based compensation and restructuring charges, lower regulatory credit revenue, and lower one-time FSD recognition versus Q3 2024, partly offset by growth in energy and services gross profit.
Net income then declined 37% year over year to $1.37 billion, with diluted EPS down 37% to $0.39. On an adjusted basis, net income fell 29% to $1.77 billion and diluted EPS decreased 31% to $0.50, below the $0.54 consensus.
Adjusted EBITDA was $4.23 billion, down 9% year over year, for a 15.0% margin.
Operating cash flow was $6.24 billion, roughly flat year over year. Capital expenditures fell to $2.25 billion, down 36%, leading to free cash flow reaching a record $3.99 billion, up 46% from a year ago. Quarter-end cash, cash equivalents, and investments rose to $41.65 billion, up 24% year over year, with the company attributing the increase primarily to stronger free cash flow.
On operations, vehicle deliveries hit a record 497,099 units, up 7% year over yea. Only Model 3/Y deliveries rose, climbing 9% to 481,166 while other models fell 30% to 15,933. Production totaled 447,450 units, down 5% year over year. Global vehicle inventory ended at 10 days of supply, an improvement from 19 days in Q3 2024.
Guidance emphasized liquidity and a cautious read-through on policy and trade variability. The company expects hardware profits to be accompanied over time by an acceleration of AI, software, and fleet-based profits. It also reiterated timing that Cybercab, Tesla Semi, and Megapack 3 target volume production in 2026, with first-generation production lines for Optimus now being installed.
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