Tesla's revenue held flat in the third quarter as operating income fell by more than half
Tesla's revenue was $28.0 billion in the third quarter, 0.2% lower than a year earlier. Operating income fell 55.8% to $718 million, because research and development spending rose 69.4% and gross profit grew by less. Capital spending more than doubled to $4.7 billion.
Revenue was flat, with services up and energy down
Revenue of $28.0 billion compared with $28.1 billion in the third quarter of 2025. For the first nine months of the year revenue was $78.7 billion, up 12.5% on the same period of 2025.
The 10-Q says services and other revenue increased $1.13 billion, or 33%, from a year earlier. Energy generation and storage revenue decreased $534 million, or 16%. The company gave tariff refunds for certain Megapack customers and a lower average selling price per Megapack unit among the reasons. Automotive regulatory credits revenue decreased $304 million, or 73%.
Gross margin widened, but operating margin stayed low
Gross profit rose 8.7% to $5.5 billion, and gross margin was 19.6%, against 18.0% a year earlier. The company said the total automotive margin increase came mainly from changes in automotive sales revenue and cost of sales, partly offset by lower regulatory credits revenue.
Research and development expense rose to $2.8 billion from $1.6 billion, which is 9.8% of revenue against 5.8%. The company said the increase was mainly from costs related to SI and other programs, such as Optimus, silicon development, battery technologies and new vehicle programs, and from higher stock-based compensation. Operating margin was 2.6%, down 3.2 points from 5.8%.
Net income was $787 million, down 42.7%, and diluted earnings per share were $0.22, against $0.39.
Capital spending doubled and free cash flow fell
Cash from operations was $6.3 billion, 0.4% higher than a year earlier. Capital spending rose 110.5% to $4.7 billion, so free cash flow, which is operating cash flow minus capital spending, fell 61.6% to $1.5 billion. Free cash flow was 5.5% of revenue, against 14.2%.
Over the first nine months capital spending was $13.0 billion. In the 10-Q the company said, "We currently expect our capital expenditures to be in excess of $20 billion in 2026". Cash and short-term investments were $45.4 billion at September 30, up from $43.5 billion at June 30.
Twelve quarters of figures
Total debt is the balance sheet's long-term debt plus its current debt line. Cash and short-term investments is the site's measure of cash.
Sources: Form 10-Q (SEC EDGAR) · Form 10-Q filing index · EDGAR company facts for Tesla · Tesla Q3 2026 update (Exhibit 99.1). More figures for Tesla are on its company page.