Tesla posts $28B revenue in Q3 2025, profit falls 37%
What's the story
Tesla has posted a profitable third quarter, with $1.4 billion in net income on $28.1 billion in revenue. The result marks a 12% increase in revenue but a 37% decrease in profits compared to the same period last year. The company's revenue exceeded Wall Street's expectations of $26.24 billion, according to LSEG data.
Financial breakdown
Operating income bounces back to $1.6 billion
Tesla's operating income bounced back to $1.6 billion, with a quarter of that coming from selling regulatory credits to other automakers. The company reported $417 million in regulatory credit sales, down 44% year-over-year. However, this income is expected to disappear eventually after President Trump's budget bill was passed, which removed penalties for automakers that exceed emission standards.
Financial stability
Cash reserves grow by 24% in Q3
Tesla's cash reserves grew by 24% in Q3 to $41.6 billion. However, the company's free cash flow, which is the amount of cash generated after accounting for day-to-day operating expenses and capital expenditures, stood at just $3.9 billion. This indicates that while Tesla's cash reserves are healthy, its ability to generate surplus cash after covering operational costs is relatively low.
Market performance
Gross margins remain a point of interest
Tesla's gross margins remained a point of interest, with investors hoping for improvements after months of decline. The company reported 18% gross margins, slightly up from last quarter's 17.2% but down from the 19.8% reported in Q3 2024. Despite these challenges, Tesla delivered a record number of EVs in Q3, totaling 497,099 vehicles—7.4% more than Q3 2024 and about 50,000 more than its production output during the same period.
Market outlook
Tesla faces challenges in the coming months
Despite a strong Q3, Tesla is expected to face challenges in the coming months. The company reported its first year-over-year sales drop in 2024 and is expected to do the same at the end of this year, with analysts predicting an 8.5% decline. This is due to an aging vehicle lineup and increased competition across major markets. CEO Elon Musk has warned of "a few rough quarters" ahead but remains optimistic about Tesla's AI plans, including robotaxis and humanoid robots.