Tesla reported Q3 2025 revenue of $28.1 billion, beating expectations, but adjusted EPS of $0.50 missed estimates amid a 37% drop in net income. Vehicle deliveries reached a record 497,099 units, boosted by U.S. buyers rushing before EV tax credits expired. The energy storage segment grew sharply, with deployments hitting 12.5 GWh.
Tesla's third-quarter 2025 earnings, released on October 23, highlighted a complex picture of growth and challenges. Revenue rose 12% year-over-year to $28.1 billion, surpassing Wall Street's $26.4 billion forecast, marking the first increase in three quarters. This uptick was driven by U.S. customers accelerating electric vehicle purchases ahead of September's expiration of federal tax benefits, leading to record deliveries of 497,099 units against production of 447,450 units. The excess deliveries over production signaled progress in reducing inventory buildup.
However, profitability weakened significantly. Adjusted earnings per share came in at $0.50, below the expected $0.55, while net income fell 37% from the prior year due to lower vehicle prices, a 50% surge in operating expenses from AI and R&D investments, and a 44% plunge in high-margin regulatory credit revenue. Operating margins slipped to 5.8% from 10.8% a year earlier, exacerbated by over $400 million in tariff costs. The stock dropped more than 5% in early trading the following day, after an initial 3% decline in after-hours.
Positive developments included the energy storage business, where deployments reached 12.5 GWh, up over 80% year-over-year, with revenue surging 44% to $3.4 billion. This growth, led by the Megafactory Shanghai ramp-up and the new Megablock modular solution, underscored Tesla's diversification into clean-energy infrastructure. Free cash flow hit a near-record $4 billion, bolstering cash reserves to $41.6 billion.
On the autonomy front, Tesla began rolling out Full Self-Driving version 14 in October, expanded robotaxi operations in the Bay Area and Austin, and reported over 6 billion cumulative supervised FSD miles. FSD take rates stood at 50-60% for Model S and X, and 20-30% for Model 3 and Y, supported by a $99-per-month subscription. Services and other revenue grew 25% to $3.5 billion. Automotive margins excluding credits improved slightly to 15.4%.
Tesla also added over 3,500 Supercharger stalls, expanding the network 18% year-over-year to about 70,000 worldwide as of June. New vehicle trims, including Standard Model 3 and Y for the post-credit market and Model Y Long Wheelbase in China, aimed to sustain demand. Wall Street maintains a Hold consensus on the stock, with an average price target of $375.63, implying about 16% downside from current levels, amid a valuation of around 265 times expected earnings.
