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TSLA Q3 Earnings Beat on Auto Margin Gains, '26 Capex View Cut
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Key Takeaways
Tesla's Q3 EPS of 48 cents beat estimates by 6.67%, while revenues of $28.05B topped expectations by 0.96%.
Automotive gross margin rose to 18.5% despite a 3% revenue decline, while vehicle deliveries slipped 2%.
Tesla's FSD customers surged 67% to 1.74M, while 2026 capex is now projected at approximately $20B.
Tesla (TSLA - Free Report) reported third-quarter 2026 adjusted earnings of 48 cents per share, beating the Zacks Consensus Estimate of 45 cents by 6.67%. However, earnings declined 4% from 50 cents in the year-ago quarter, reflecting higher operating expenses.
Revenues totaled $28.05 billion, down marginally from $28.1 billion a year ago. Revenues surpassed the Zacks Consensus Estimate of $27.78 billion by 0.96%.
Growing Full Self-Driving (FSD) adoption and strength in services supported results.
Tesla produced 464,391 vehicles during the quarter, up 4% year over year. Model 3/Y production increased 5% to 457,387 units, while production of other models declined 40% to 7,004 units.
Vehicle deliveries declined 2% year over year to 486,532 units. Model 3/Y deliveries slipped 1% to 478,237 units, while other model deliveries plunged 48% to 8,295 units. Global vehicle inventory was 11 days of supply compared with 10 days a year earlier.
Management highlighted record quarterly deliveries across several markets, including Canada, Australia, Japan and Taiwan. Tesla exited the quarter with its highest passenger vehicle order backlog in four years.
Deliveries were primarily constrained by production, with battery availability remaining a key bottleneck in increasing vehicle output.
Automotive Revenues Decline, Margins Improve
Automotive revenues declined 3% year over year to $20.56 billion. Automotive sales contributed $20.09 billion, while regulatory credit revenues dropped to $113 million from $417 million. Automotive leasing revenues totaled $353 million compared with $429 million a year ago.
Despite lower revenues, automotive gross margin improved to 18.5% from 17% in the year-ago period. Excluding regulatory credits, automotive gross margin expanded sequentially to 18.1% from 16.3%.
Management attributed the sequential improvement to a favorable regional delivery mix, particularly increased deliveries in Asia Pacific. However, lower vehicle average selling prices and reduced regulatory credit revenues remained headwinds.
Energy Business Faces Revenue Pressure
Energy generation and storage revenues decreased 16% year over year to $2.88 billion from $3.42 billion partly due to tariff-related customer refunds.
Energy storage deployments reached 13.7 gigawatt-hours, up 10% year over year. Energy gross margin improved sequentially to 33.1% from 20.4%, primarily benefiting from tariff refunds and warranty-related adjustments.
The company commenced production at Megafactory Texas, which has planned annual capacity of 50 GWh. Management highlighted record energy storage orders and backlog, supported by growing demand from data centers. Tesla also shipped its first Megapacks incorporating domestically manufactured lithium iron phosphate battery cells.
Services Growth and FSD Adoption Accelerate
Services and other revenues surged 33% year over year to $4.61 billion. Segment gross profit reached a record $734 million, increasing $86 million sequentially, while gross margin improved to 15.9% from 14.1%.
Growth was supported by charging, insurance and parts sales. Meanwhile, active paid FSD customers climbed 67% year over year to 1.74 million. More than 75% of new vehicle deliveries in North America included paid FSD subscriptions at delivery.
Tesla also expanded its autonomous transportation operations by introducing Cybercab rides in Austin. Cumulative unsupervised Robotaxi miles increased eightfold sequentially, approaching 2 million miles by quarter-end.
Operating Expenses Weigh on Profitability
Total gross profit increased 9% year over year to $5.49 billion, while gross margin expanded 160 basis points to 19.6%. However, operating expenses surged 39% to $4.78 billion, driven by higher research and development spending, stock-based compensation and administrative costs.
Consequently, operating income declined 56% to $718 million, with operating margin contracting to 2.6% from 5.8%.
Adjusted EBITDA declined 8% to $3.90 billion. Its corresponding margin contracted to 13.9% from 15%, underscoring continued profitability pressure from investments in artificial intelligence, robotics and manufacturing expansion.
Cash Position Strengthens Amid Expansion Plans
Tesla generated operating cash flow of $6.26 billion, broadly flat year over year. Capital expenditures increased to $4.73 billion from $2.25 billion, while free cash flow declined 62% to $1.53 billion.
Cash, cash equivalents and short-term investments totaled $45.45 billion as of Sept. 30, 2026, up from $43.52 billion at the end of June.
Management trimmed its 2026 capital expenditure outlook to approximately $20 billion from $25 billion guided earlier. Spending priorities include Robotaxi fleet expansion, Optimus production, semiconductor manufacturing, solar capacity and additional computing infrastructure.
Tesla is targeting annual vehicle production capacity of approximately 5 million units by 2030. Management also expects Optimus deliveries to external customers toward the end of 2027, while Robotaxi operations are projected to make a more meaningful contribution to revenues and profitability during the second half of next year.
Genuine Parts Company (GPC - Free Report) reported third-quarter 2026 adjusted earnings of $2.07 per share, missing the Zacks Consensus Estimate of $2.09. The bottom line increased 4.5% from $1.98 in the year-ago quarter. Revenues rose 4.2% year over year to $6.52 billion and surpassed the consensus estimate of $6.5 billion. Comparable sales increased 2.9%, led by strong Industrial demand. Genuine Parts ended September with $2.4 billion of liquidity, including $763 million in cash.
General Motors (GM - Free Report) delivered strong third-quarter 2026 results yesterday. Its earnings per share grew 32.2% year over year to $3.70 and topped the Zacks Consensus Estimate of $3.55. Revenues of $50.02 billion increased 3% year over year and outpaced the consensus mark of $48.21 billion.On a further encouraging note, General Motors raised its adjusted automotive free cash flow forecast to $11.5-$12.5 billion from $9.5-$11.5 billion and authorized a $20-billion multi-year share repurchase program.
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TSLA Q3 Earnings Beat on Auto Margin Gains, '26 Capex View Cut
Key Takeaways
Tesla (TSLA - Free Report) reported third-quarter 2026 adjusted earnings of 48 cents per share, beating the Zacks Consensus Estimate of 45 cents by 6.67%. However, earnings declined 4% from 50 cents in the year-ago quarter, reflecting higher operating expenses.
Revenues totaled $28.05 billion, down marginally from $28.1 billion a year ago. Revenues surpassed the Zacks Consensus Estimate of $27.78 billion by 0.96%.
Growing Full Self-Driving (FSD) adoption and strength in services supported results.
Tesla, Inc. Price, Consensus and EPS Surprise
Tesla, Inc. price-consensus-eps-surprise-chart | Tesla, Inc. Quote
Vehicle Deliveries Fall Despite Strong Demand
Tesla produced 464,391 vehicles during the quarter, up 4% year over year. Model 3/Y production increased 5% to 457,387 units, while production of other models declined 40% to 7,004 units.
Vehicle deliveries declined 2% year over year to 486,532 units. Model 3/Y deliveries slipped 1% to 478,237 units, while other model deliveries plunged 48% to 8,295 units. Global vehicle inventory was 11 days of supply compared with 10 days a year earlier.
Management highlighted record quarterly deliveries across several markets, including Canada, Australia, Japan and Taiwan. Tesla exited the quarter with its highest passenger vehicle order backlog in four years.
Deliveries were primarily constrained by production, with battery availability remaining a key bottleneck in increasing vehicle output.
Automotive Revenues Decline, Margins Improve
Automotive revenues declined 3% year over year to $20.56 billion. Automotive sales contributed $20.09 billion, while regulatory credit revenues dropped to $113 million from $417 million. Automotive leasing revenues totaled $353 million compared with $429 million a year ago.
Despite lower revenues, automotive gross margin improved to 18.5% from 17% in the year-ago period. Excluding regulatory credits, automotive gross margin expanded sequentially to 18.1% from 16.3%.
Management attributed the sequential improvement to a favorable regional delivery mix, particularly increased deliveries in Asia Pacific. However, lower vehicle average selling prices and reduced regulatory credit revenues remained headwinds.
Energy Business Faces Revenue Pressure
Energy generation and storage revenues decreased 16% year over year to $2.88 billion from $3.42 billion partly due to tariff-related customer refunds.
Energy storage deployments reached 13.7 gigawatt-hours, up 10% year over year. Energy gross margin improved sequentially to 33.1% from 20.4%, primarily benefiting from tariff refunds and warranty-related adjustments.
The company commenced production at Megafactory Texas, which has planned annual capacity of 50 GWh. Management highlighted record energy storage orders and backlog, supported by growing demand from data centers. Tesla also shipped its first Megapacks incorporating domestically manufactured lithium iron phosphate battery cells.
Services Growth and FSD Adoption Accelerate
Services and other revenues surged 33% year over year to $4.61 billion. Segment gross profit reached a record $734 million, increasing $86 million sequentially, while gross margin improved to 15.9% from 14.1%.
Growth was supported by charging, insurance and parts sales. Meanwhile, active paid FSD customers climbed 67% year over year to 1.74 million. More than 75% of new vehicle deliveries in North America included paid FSD subscriptions at delivery.
Tesla also expanded its autonomous transportation operations by introducing Cybercab rides in Austin. Cumulative unsupervised Robotaxi miles increased eightfold sequentially, approaching 2 million miles by quarter-end.
Operating Expenses Weigh on Profitability
Total gross profit increased 9% year over year to $5.49 billion, while gross margin expanded 160 basis points to 19.6%. However, operating expenses surged 39% to $4.78 billion, driven by higher research and development spending, stock-based compensation and administrative costs.
Consequently, operating income declined 56% to $718 million, with operating margin contracting to 2.6% from 5.8%.
Adjusted EBITDA declined 8% to $3.90 billion. Its corresponding margin contracted to 13.9% from 15%, underscoring continued profitability pressure from investments in artificial intelligence, robotics and manufacturing expansion.
Cash Position Strengthens Amid Expansion Plans
Tesla generated operating cash flow of $6.26 billion, broadly flat year over year. Capital expenditures increased to $4.73 billion from $2.25 billion, while free cash flow declined 62% to $1.53 billion.
Cash, cash equivalents and short-term investments totaled $45.45 billion as of Sept. 30, 2026, up from $43.52 billion at the end of June.
Management trimmed its 2026 capital expenditure outlook to approximately $20 billion from $25 billion guided earlier. Spending priorities include Robotaxi fleet expansion, Optimus production, semiconductor manufacturing, solar capacity and additional computing infrastructure.
Tesla is targeting annual vehicle production capacity of approximately 5 million units by 2030. Management also expects Optimus deliveries to external customers toward the end of 2027, while Robotaxi operations are projected to make a more meaningful contribution to revenues and profitability during the second half of next year.
TSLA currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Key Releases From the Auto Space
Genuine Parts Company (GPC - Free Report) reported third-quarter 2026 adjusted earnings of $2.07 per share, missing the Zacks Consensus Estimate of $2.09. The bottom line increased 4.5% from $1.98 in the year-ago quarter. Revenues rose 4.2% year over year to $6.52 billion and surpassed the consensus estimate of $6.5 billion. Comparable sales increased 2.9%, led by strong Industrial demand. Genuine Parts ended September with $2.4 billion of liquidity, including $763 million in cash.
General Motors (GM - Free Report) delivered strong third-quarter 2026 results yesterday. Its earnings per share grew 32.2% year over year to $3.70 and topped the Zacks Consensus Estimate of $3.55. Revenues of $50.02 billion increased 3% year over year and outpaced the consensus mark of $48.21 billion.On a further encouraging note, General Motors raised its adjusted automotive free cash flow forecast to $11.5-$12.5 billion from $9.5-$11.5 billion and authorized a $20-billion multi-year share repurchase program.