Record sales fail to meet Tesla’s profit target, earnings per share drop by 31%

Elon Musk’s Tesla failed to live up to expectations as the carmaker’s profits plunged due to tariffs and research costs, although it beat Wall Street estimates in reporting record third-quarter revenue.

The company reported adjusted earnings of 50 US cents per share for the period, a 31 per cent decline from a year earlier, it said on Wednesday. That fell short of the average analyst estimate of 54 US cents, according to Bloomberg data. Revenue, however, came in above expectations at US$28.1 billion.

Tesla’s $1.45 trillion valuation largely reflects investor bets on CEO Elon Musk’s pivot to robotics and AI, but vehicle sales remain key to the financial stability of the company while those products are being developed. Shares of the Austin, Texas-based company were down 4 per cent in extended trading.

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The reported sales suggest that the EV-maker is not immune to the rising costs that have substantially overhauled America’s auto industry under President Donald Trump’s radical policies.

Demand for Tesla’s vehicles and those of its rivals is also expected to drop through the rest of the year without the tax credits that have been a key driver of EV sales.

Apart from the removal of tax credits and the waning sales of regulatory credits that traditional automakers bought to make up for their polluting vehicles, Tesla is also grappling with tariffs imposed by the Trump administration on auto-parts imports, which Chief Financial Officer Vaibhav Taneja said cost Tesla more than $400 million in the quarter.

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Tesla also reported a 50 per cent rise in operating expenses driven by AI and other research and development projects, an increase in stock-based compensation, and on an earnings conference call, Taneja said capital expenditures would rise substantially in 2026.

“Tesla dished out just the right amount of good and bad news to both appease its fans while also providing enough evidence for its critics,” Camelthorn Investments adviser Shawn Campbell told Reuters. “This earnings report isn’t going to change anyone’s mind on Tesla.”

With inputs from agencies