Tesla Q3 Results: Profit Declines 37% Despite 7% Rise in Sales; Musk Bets on Robotaxi and AI Future

October 23, 2025: Shares of Tesla fell 3.5% in after-hours trading after the company reported a 37% year-on-year decline in net profit for the third quarter of 2025. This marks the company’s fourth straight quarterly drop, even as sales rose. The company’s profit for the quarter stood at $1.4 billion, or $0.39 per share, compared to $2.2 billion, or $0.62 per share, a year earlier.

Revenue Grows but Margins Tighten

The quarter witnessed a revenue increase, rising from $25.2 billion to $28.1 billion. The increase was driven by higher sales volumes and strength in the company’s battery storage and charging segments. During the quarter, the gross margin was at 18%, which is by far the highest for this year, yet still down by 25%. Earnings excluding special items were $0.50 per share, which is $0.72 down from the previous year. However, the company noted that some customers accelerated purchases before the expiration of the $7,500 U.S. EV tax credit on October 1.

Reasons for the Declining Margins

Tesla cited that higher costs and tariffs have offset the gains from increased vehicle sales, making them the key reasons for the profit decline. The previously projected growth of the company was 20–30% growth for 2025, a target that the company has yet to meet. Further, the recent launch of stripped-down versions of the Model Y and Model X, priced just under $40,000, has yet to generate significant market excitement. However, the company’s EV sales grew 7% during the quarter, signalling a partial recovery after a period of muted demand earlier this year.

Management Response

During a conference call with investors, Elon Musk emphasised that Tesla has made a strategic shift toward autonomous and AI-driven technologies. He highlighted the company’s plans for driverless robotaxi services, the expansion of its AI projects, and the rollout of its Optimus humanoid robot for industrial and domestic applications. Further, Musk described Optimus as “so real you’ll need to poke it,” calling the concept “the biggest product of all time.” He added that Tesla plans to remove safety monitors from its robotaxi fleet in Austin, Texas, by year-end, expanding the service from San Francisco to as many as ten cities before 2026.

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