Tesla's third-quarter GAAP net income fell 43% from a year earlier while revenue stayed flat. The company's Q3 2026 update letter, filed with the SEC, shows costs and capital spending climbing sharply.
The numbers
Figures are in millions of dollars, Q3 2026 against Q3 2025.
| Measure | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenue | 28,046 | 28,095 | flat |
| Automotive revenue | 20,560 | 21,205 | -3% |
| Energy generation and storage | 2,881 | 3,415 | -16% |
| Services and other | 4,605 | 3,475 | +33% |
| Gross profit | 5,494 | 5,054 | +9% |
| Operating expenses | 4,776 | 3,430 | +39% |
| Operating income | 718 | 1,624 | -56% |
| GAAP net income | 787 | 1,373 | -43% |
| Non-GAAP net income | 1,697 | 1,770 | -4% |
| Capital expenditures | 4,732 | 2,248 | roughly doubled |
| Free cash flow | 1,531 | 3,990 | -62% |
GAAP earnings per share were $0.22, down from $0.39. Non-GAAP earnings per share were $0.48, against $0.50.
Where the money went
Gross margin improved to 19.6%, up 160 basis points. Operating expenses grew faster than gross profit, so operating margin landed at 2.6%.
R&D alone rose to $2.76 billion from $1.63 billion. Tesla attributes the rise in operating expenses to "SI and other R&D projects, SBC (including 2025 CEO Performance Award) and SG&A".
Operating cash flow held steady near $6.3 billion. Capex took most of it, which is why free cash flow dropped. Cash and short-term investments stood at $45.4 billion.
What else Tesla reported
- Robotaxi: Cybercab joined the Robotaxi fleet in Austin, with rides beginning Sept. 3.
- FSD: active subscriptions reached 1.74 million, up from 1.04 million.
- Production: the 10 millionth vehicle was produced and delivered, with record output at Gigafactory Berlin.
- Energy: Megafactory Texas has begun production, with 50 GWh planned.
- Demand: Tesla reports its largest passenger-vehicle backlog in four years.
- Roadster: the next-generation model was unveiled Oct. 15, as covered in Tesla's new Roadster has thrusters, a sub-second 0-60 claim and no price.
Slide 3 of the letter says FSD (Supervised) reached "over 75% of new vehicle deliveries in North America", a nearly twenty-point sequential increase. Tesla's footnote says active driver supervision is required and the vehicle is not autonomous.
Why it matters
Adjusted income barely moved, while GAAP income fell by more than a third. Tesla's explanation for the opex rise names stock-based compensation alongside R&D and SG&A.
Tesla says it keeps investing "through R&D and Capex spend across our businesses, including SI, robotics and energy". The letter gives no separate SI spending figure. On volume, Tesla says "battery availability continued to be the limiting factor in increasing auto volumes in the quarter", and that it has made additional progress in securing future supply.
Related reading: Tesla and SpaceX form special committees to weigh a merger.
