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Tesla reported better-than-expected third-quarter results after the bell on Wednesday, even as automotive revenue dropped. The stock slid more than 3% in extended trading. Here's how the company did, compared with estimates from analysts polled by LSEG: - Earnings per share: 48 cents adjusted vs. 43 cents estimated - Revenue: $28.05 billion vs. $27.9 billion estimated Tesla's earnings report lands a day after CEO Elon Musk told investors on SpaceX's quarterly call that it would be a "good idea" for his two companies to merge, and said the boards at both have formed special committees to discuss a possible tie-up. "I feel like I'm tap dancing through a minefield," Musk said on the call, responding to a question about a potential merger. Musk addressed the matter in his opening comments on the Tesla call, but didn't provide any additional information. "I think I said everything that should be said yesterday," he said. Tesla's revenue was down slightly flat from a year earlier, when the company generated sales of $28.24 billion, according to the earnings deck. In Tesla's core automotive business, revenue declined 3% from a year earlier to $20.56 billion in the quarter. Energy revenue fell 16% to $2.88 billion. Balancing out the declines were gains in Tesla's services and other revenue. Sales there climbed 33% from a year ago to $4.61 billion. Tesla blamed its lackluster automotive revenue and profits on lower average sales prices for its cars during the quarter, and trouble securing battery supplies to make enough vehicles to fulfill a backlog of orders. Net income attributable to common share holders plummeted 29% to $787 million, or 22 cents a share, from $1.11 billion, or 32 cents a share, a year earlier, Tesla said. The drop in profitability reflects a surge in spending on Optimus humanoid robots and other artificial intelligence initiatives. Capital expenditures more than doubled from a year earlier to $3.73 billion. Free cash flow plunged by 62% year over year to $1.53 billion, after Tesla turned free cash flow negative in the second quarter. Tesla said uptake of its FSD (Supervised), a partially automated driving system the company sells for $99 per month in the U.S., grew by 20 percentage points from the second quarter. Active FSD subscriptions increased 67% from a year earlier to 1.74 million. "We believe that FSD is driving demand in markets where it is available, and we continue to work with regulators to get it approved in other markets," the company said in its investor deck. Ashok Elluswamy, Tesla's vice president of Autopilot, said on the earnings call that the company plans to give some customer cars access to its forthcoming FSD (Unsupervised) systems around the second quarter of next year. Tesla is testing its Cybercab, a bronze two-seater designed for use as a robotaxi, but it's not yet sold to individuals. Musk said on the call that "the vast majority of the Cybercab stuff will be essentially Tesla-owned and transport-as-a-service." The company plans to bring Cybercab to cities beyond Austin, Texas, this year, Taneja said, paying attention to operating costs like maintenance, charging and cleaning. Musk said the company's driverless Robotaxi fleet will start to contribute to the company's financials in 2027. That fleet now includes 362 Model Y Robotaxi, and 449 Cybercab vehicles authorized for driverless operations in Texas, according to the state's Department of Motor Vehicles, "It's not like going to move the needle this quarter," Musk said, "I think it starts to become noticeable in Q2 and then probably a big deal by Q3 or Q4 of next year." Barring regulatory intervention and protectionism, Musk predicted that Tesla "will end up doing a majority of all passenger miles on Earth in any country where it is allowed to operate freely." Tesla said its auto sales in Canada, Japan, Taiwan and Australia hit new records during the quarter. However, the company has gotten meager growth out of its core market of late as Chinese EV makers such as BYD and Xiaomi gained popularity in Asia and Europe with affordable and innovative EVs. Tesla was also hit last year by the end of a federal EV tax credit. Earlier this month, Tesla reported vehicle deliveries for the third quarter of 486,532, about 2% below the year-ago number. Deliveries are the closest approximation of sales reported by Tesla but are not precisely defined in its shareholder communications. One of Tesla's big investments is in a semiconductor factory that it's building with SpaceX and Intel in Grimes County, Texas. That partnership with SpaceX along with other areas of overlap, including work on Tesla's recently announced Roadster refresh, fueled intensifying speculation that Musk's companies were on the verge of combining in what would be a historic transaction. On Optimus, Musk said Tesla is "making good progress" on the AI systems that control the robots in development. He said there's "still quite a lot of work to do with regard to the AI and the robot for it to be truly useful for open-ended tasks." Musk said he expects current issues around electromechanical design, reliability, usage duration, and AI to be "solved around the end of next year."
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