Tesla delivered a record 497,099 electric vehicles in Q3 2025, boosted by buyers rushing before the $7,500 EV tax credit expired. However, the company reported declining margins and a 37% drop in GAAP earnings per share, raising concerns about funding for future ambitions. CEO Elon Musk highlighted expansions in robotaxi operations amid ongoing AI investments.
Tesla's third-quarter 2025 earnings, released last week, revealed mixed results. The company achieved a record 497,099 vehicle deliveries, driven partly by anticipation of the federal $7,500 EV tax credit's expiration. Revenue reached $28.1 billion, with the energy storage business posting 44% growth. Cash and equivalents stood at $41.6 billion, providing a strong liquidity position.
Despite these positives, profitability weakened. Operating profit was $1.6 billion, yielding a 5.8% margin—a 5% decline year-over-year. GAAP earnings per share fell 37%, and research and development costs hit $1.6 billion. Investor John Bromels warned, “The company’s Q3 numbers contain a huge red warning light that could put Musk’s future plans in jeopardy.” He highlighted risks from expected Q4 sales drops post-tax credit and lower-priced Model 3 and Model Y variants, estimating, “I wouldn’t be surprised to see gross profit cut in half (or worse) in Q4.” Bromels cautioned that shrinking margins might lead to a net loss next quarter, challenging Tesla's trillion-dollar valuation.
On the growth front, Musk emphasized robotaxi progress. The service, launched in limited form in 2025 with human drivers, is set to expand to eight to 10 cities by year-end and multiple states. Musk predicted “millions” of robotaxis on U.S. roads by the end of 2026. This aligns with Tesla's valuation premium—over 16 times sales—positioning it as an AI play rather than a traditional automaker. Morgan Stanley analyst Adam Jonas stated, “I'm callin' it... Autonomous cars are solved... enough to pull the safety driver at scale in major metros.”
Wall Street remains divided, with analysts issuing 14 Buy, 10 Hold, and 10 Sell ratings, a consensus Hold, and an average 12-month price target of $395.54, implying a 13% downside from current levels. Tesla's vertical integration and AI investments could position it to capture a potential $10 trillion robotaxi market, though competition looms.