Tesla reported its third quarter (Q3 2026) revenue of $28.05 billion, slightly beating estimates, while non-GAAP EPS of $0.48 exceeded the $0.43 consensus, despite a 56% year-over-year drop in operating income due to heavy spending on AI and Optimus humanoid robots.
Tesla delivered 486,532 vehicles, with CEO Elon Musk saying demand is "exceeding production by a significant margin," driven largely by Full Self-Driving (FSD) interest. While core automotive revenue fell 3% to $20.56 billion, services and other revenue surged 33% to $4.61 billion, hitting a record gross profit.
“We believe that FSD is driving demand in markets where it is available, and we continue to work with regulators to get it approved in other markets,” the company said in its investor deck.
Ashok Elluswamy, Tesla’s vice president of Autopilot, said on the earnings call that the company plans to give some customer cars access to its forthcoming FSD (Unsupervised) systems around the second quarter of next year.
Auto gross margins rebounded to 18.1%, and overall gross margin expanded by 160 basis points to 19.6%, though high R&D costs suppressed net income.
The Cybercab, Tesla’s two-seat autonomous robotaxi, launched unsupervised service in Austin, Texas, with the fleet growing by a factor of 10 since launch.
Tesla plans to expand the Cybercab fleet to Dallas in November and other cities by year-end, with the Robotaxi service expected to contribute financially in 2027. Musk clarified that the Cybercab will primarily operate as a Tesla-owned transport-as-a-service, distinct from consumer vehicles like the Model 3 and Model Y.
The vehicle utilizes 50% fewer parts than other Tesla models, with production ramping at Giga Texas to support both internal fleet needs and future customer deliveries.
“It’s not like going to move the needle this quarter,” Musk said, “I think it starts to become noticeable in Q2 and then probably a big deal by Q3 or Q4 of next year.”
Barring regulatory intervention and protectionism, Musk predicted that Tesla “will end up doing a majority of all passenger miles on Earth in any country where it is allowed to operate freely.”
Tesla maintains its target of 5 million vehicles per year by 2030, with new factories in Berlin and Reno (Semi) supporting this expansion.
Optimus humanoid robots have entered production, with Musk noting that the AI architecture is still being refined to handle open-ended tasks without pre-programmed exoskeletons. Tesla aims to ship Optimus to customers in about a year, targeting an annualized production rate of 20,000 units per week by mid-2027.
An Optimus video demonstrating non-preprogrammed tasks is expected within a month, and the Tesla AI5 chip integration is slated for April 2027.
Capital expenditure for Optimus and AI compute is rising, with Musk highlighting the massive scale of the Terafab chip plant, which will cost tens of billions in equipment shared with SpaceX.
Tesla returned to positive free cash flow of $1.53 billion, down from $3.99 billion in the prior year, while maintaining $45.4 billion in cash and investments. Musk lowered the annual capital spending forecast to about $20 billion, down from the previous $25 billion+ guidance, citing efficiency in current projects.