Tesla’s revenue for the quarter stood at $28.24 billion, a growth of 26% from the same period last year. However, its Earnings Per Share (EPS) at $0.33, was significantly below Wall Street expectations of $0.51. Net profit for the period was down 5% from last year to $1.11 billion.
Revenue from the core automotive business increased by 23% year-on-year to $20.52 billion, while the energy business revenue saw 13% growth to $3.14 billion. Solar and Battery Energy Storage Systems form part of this business vertical.
Tesla’s gross margins dropped despite a stronger topline as the average selling price per vehicle declined, leading to a drop in gross margins, which ended up missing expectations by a wide margin. Gross margins declined to 16.8% from 17.2% earlier and well below the street expectations of 19.4%.
During the quarter, Tesla sold more low-cost versions of the Model 3 and Model Y, after retiring its more expensive flagship models “S” and “X.”
Gross margins also fell during the quarter as operating expenses increased by 47% from last year, faster than the revenue growth. That also resulted in operating margins plunging to just 1.4% from 4.1% last year.
The other major concern that worried the street was Tesla’s negative free cash flow. The deficit of $1.1 billion was in comparison to a positive $146 million figure last year and $1.44 billion in the previous quarter. Capex also more than doubled during the quarter to $5.79 billion, up 142%.
Tesla CFO Vaibhav Taneja said during the earnings call that operating expenditure will continue to grow in 2026 and beyond, adding that higher commodity prices and interest rate changes will further add to the costs.
Shares of Tesla are down 4.4% in extended trading at $374.01. The stock fell 1.3% in regular trade as well, and is down 15% so far in 2026.
