Haverhill Financial Research · News · Earnings · October 22, 2026
The short version
Tesla's third-quarter update, released after Wednesday's close, showed revenue of $28.05 billion, essentially the same as a year ago. Gross margin improved to 19.6% from 18.0%, so the company made more on what it sold.
That didn't reach the bottom line. Operating expenses rose 39% to $4.78 billion, and operating income fell 56% to $718 million. GAAP net income was $787 million, or $0.22 a share, down from $1.37 billion, or $0.39. On Tesla's adjusted basis, EPS was $0.48 against $0.50 last year.
The quarter in numbers
| Measure | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Total revenue | $28,046M | $28,095M | Flat |
| Automotive revenueRegulatory credits $113M vs. $417M | $20,560M | $21,205M | −3% |
| Energy generation and storageStorage deployed 13.7 GWh vs. 12.5 GWh | $2,881M | $3,415M | −16% |
| Services and other | $4,605M | $3,475M | +33% |
| Gross profit | $5,494M | $5,054M | +9% |
| Operating expensesR&D $2,761M vs. $1,630M | $4,776M | $3,430M | +39% |
| Operating income | $718M | $1,624M | −56% |
| Net income, GAAPEPS $0.22 vs. $0.39 | $787M | $1,373M | −43% |
| Free cash flow | $1,531M | $3,990M | −62% |
Operating income bridge, $ millions. Source: Tesla Q3 2026 update; arrangement is ours.
Cars, batteries and everything else
Vehicles. Tesla delivered 486,532 vehicles, down 2%, and built 464,391, up 4%.
Energy. Storage deployments rose 10% to 13.7 GWh, but energy revenue fell 16% to $2.88 billion.
Services and other. Revenue rose 33% to $4.61 billion, and gross profit doubled to a record $734 million.
Software. Active FSD subscriptions reached 1.74 million, up from 1.04 million a year ago.
Robotaxi and Optimus. Rides in Cybercabs began in Austin on September 3, and cumulative unsupervised miles reached nearly two million. Optimus production started on high-volume lines in Fremont.
Where the money went
Research and development rose to $2.76 billion from $1.63 billion. Tesla's update puts the increase in operating expenses down to its AI and other R&D projects, stock-based compensation (including the 2025 CEO performance award) and SG&A. Capital spending more than doubled to $4.73 billion, which is why free cash flow fell to $1.53 billion even though operating cash flow held steady at $6.26 billion. Cash and investments still ended the quarter at $45.4 billion.
Our take
The core business did better than the headline profit suggests. Gross profit grew $440 million on flat sales, even with regulatory credit revenue down about $300 million. Most of the profit drop comes from Tesla choosing to spend more, not from weaker sales. Whether that spending pays off is a question for 2027, not this quarter.
Sources and disclosures
Figures come from Tesla's Q3 2026 update, filed with the SEC on October 21, 2026. Percentage changes, the gross profit change and the operating income bridge are our calculations.
Disclosures. Haverhill Financial Research is a publisher of general financial commentary. This article is not personalized investment advice and does not consider any reader's financial situation; readers should do their own research. Nothing here is a recommendation to buy or sell any security. Company figures and guidance can change. The author of this post does not hold positions in Tesla or the other companies named. Data as of October 22, 2026.
