Tesla reported third-quarter 2026 results after the market closed on 2026-10-21, showing revenue of $28.05 billion. That was flat from a year earlier and in line with Wall Street's expectation of $28.06 billion. Non-GAAP earnings came to $0.48 per share, ahead of the $0.45 consensus but 4% below the $0.50 posted a year ago.
Margins improved from the second quarter, yet profit still fell. Total gross margin reached 19.6%, up from 18.0% a year earlier and 16.8% in Q2. Operating income, however, dropped 56% to $718 million, an operating margin of 2.6% compared with 5.8% a year ago and 1.4% last quarter. On a GAAP basis, net income fell 43% to $787 million, or $0.22 per share.
The squeeze came from spending. Operating expenses rose 39% to $4.78 billion, with research and development up 69% to $2.76 billion as Tesla funds what it now calls "Super Intelligence," Optimus and the Cybercab. Stock-based compensation, which includes the 2025 CEO pay package, climbed to $1.17 billion from $663 million a year ago. GAAP net income also included a $288 million unrealized gain on bitcoin holdings, partly offset by a $142 million unrealized loss on its SpaceX equity investment.
Capital spending reached $4.73 billion, more than double the $2.25 billion of a year earlier. Free cash flow was $1.53 billion, down from $3.99 billion a year ago but a recovery from negative $1.09 billion in Q2. Tesla ended the quarter with $45.4 billion in cash and investments. Capex totals $13.01 billion for the first nine months, about half of the "more than $25 billion" management has guided for the year. Reaching that figure would require roughly $12 billion in the fourth quarter, and the shareholder letter did not update the guidance.
In the car business, automotive gross margin excluding regulatory credits was 18.1%, up from 16.3% in Q2 and 15.4% a year ago, though below the 19.2% in Q1, which had benefited from one-time warranty and tariff items. Tesla credited a better regional and product mix and more FSD subscription revenue, partly offset by lower average selling prices. Regulatory credit revenue was only $113 million, down 73% from $417 million a year earlier.
Energy generation and storage revenue fell 16% to $2.88 billion, which Tesla partly attributed to tariff-related customer refunds, even though deployments rose 10% to 13.7 GWh. The segment's gross margin rose to 33% from 20% in Q2, but gross profit slipped to $954 million from $1.07 billion a year ago. Services and other was the strongest area, with revenue up 33% to $4.61 billion and record gross profit of $734 million from charging, insurance and parts.
Tesla said "battery availability continued to be the limiting factor in increasing auto volumes in the quarter" and that it ended Q3 with "the largest backlog for our passenger vehicles in four years." Deliveries of 486,532 vehicles were down 2.1% from a year earlier but ahead of the 461,974 consensus. Tesla built 464,391, delivering 22,141 more than it produced, which cut inventory to 11 days of supply from 15 in Q2. Deliveries of other models, including Cybertruck, Semi, Model S and Model X, fell 48%, and average selling prices declined again.
On autonomy, Tesla said active FSD subscriptions reached 1.74 million, up 67%, a count that includes upfront purchases as defined in Elon Musk's 2025 pay package. Its Robotaxi service logged nearly 2 million cumulative unsupervised miles by the end of the quarter, a month after the Cybercab joined the Austin fleet. Management was scheduled to discuss the results on an earnings call at 5:30 p.m. ET.
