Tesla profits drop 43% in Q3

Tesla’s third-quarter 2026 results show revenue roughly flat at $28 billion but a sharp hit to profitability: net income fell 43% to $787 million as automotive revenue slipped 3% year-over-year to $20.6 billion and energy revenue from solar panels and storage dropped 16% to $2.9 billion. Services and other revenue, which includes parts and Supercharger fees, rose about a third to $4.6 billion. Operating expenses surged 39% to $4.8 billion, cutting operating margin to 2.6% from 5.8% a year earlier. Capital expenditures climbed 110% to $4.7 billion while free cash flow plunged 62% to $1.5 billion.

The decline reflects several concrete trends: fewer cars sold and lower average selling prices, a retreat in the once-booming energy storage business, and a collapse in regulatory-credit income to $113 million (from $417 million) as other automakers now sell EVs and U.S. policy has eliminated such credits. Management attributes higher costs partly to aggressive AI-hardware investment and a costly CEO compensation package. Together, reduced credits and battery/solar sales plus rapidly rising operating and capital spending explain the diminished profitability despite revenues holding steady.