Tesla reported better-than-expected third-quarter earnings and revenue, despite a decline in automotive sales. The company is significantly increasing investments in AI and robotics, impacting net income and free cash flow.
CEO Elon Musk also commented on potential merger talks between Tesla and SpaceX, while the company continues to advance its FSD technology and driverless vehicle initiatives.
Tesla, Inc. (NASDAQ: TSLA) has once again demonstrated its resilience, reporting third-quarter financial results that exceeded Wall Street's expectations for both earnings and sales. This comes even as the electric vehicle giant experienced a year-over-year decline in its core automotive revenue.
Despite a 3% dip in automotive revenue to $20.56 billion and a 16% drop in energy revenue to $2.88 billion, Tesla's overall revenue reached $28.05 billion, surpassing the analyst consensus of $27.9 billion. Adjusted earnings per share (EPS) came in at 48 cents, beating the estimated 43 cents.
The company attributed the challenges in its automotive segment to lower average selling prices and difficulties in securing battery supplies to meet order backlogs. However, a significant 33% surge in services and other revenue to $4.61 billion helped to offset these declines.
Net income saw a considerable decrease of 29% to $787 million, or 22 cents per share, compared to $1.11 billion, or 32 cents per share, in the previous year. This reduction in profitability is largely due to a substantial increase in investments in artificial intelligence initiatives, including the development of Optimus humanoid robots, with capital expenditures more than doubling year-over-year to $3.73 billion. Consequently, free cash flow experienced a 62% drop, totaling $1.53 billion.
On the technology front, Tesla reported a 20 percentage point increase in the adoption of its FSD (Supervised) system, with active subscriptions rising 67% year-over-year to 1.74 million. The company plans to offer its FSD (Unsupervised) systems to select customers around the second quarter of next year. Furthermore, Tesla is advancing its Cybercab project, a driverless robotaxi, with the expectation that the fleet will begin contributing to financials by 2027.
CEO Elon Musk addressed ongoing discussions about a potential merger between Tesla and SpaceX, noting that special committees have been formed at both companies to explore the possibility. While providing no new details, Musk stated his earlier remarks on the matter were comprehensive.
Tesla's vehicle deliveries for the quarter were 486,532, a slight decrease from the previous year. The company noted record auto sales in Canada, Japan, Taiwan, and Australia, but faces increasing competition from domestic EV manufacturers in Asia and Europe, alongside the lingering effects of past federal EV tax credit expirations.
Significant investments are also being channeled into a joint semiconductor factory with SpaceX and Intel in Texas, further fueling speculation about closer ties between Musk's ventures.
