Tesla Q3 Profit Plunges 37% Despite Record Sales as Tariffs and Costs Bite

Tesla Inc. stunned investors on October 22, 2025, revealing a sharp profit plunge in its third-quarter earnings despite logging record vehicle sales, exposing cracks in its core business as CEO Elon Musk pushes ambitious AI and robotics ventures. Adjusted earnings per share fell 31% year-over-year to 50 cents, missing analyst expectations of 54 cents, while GAAP net income tanked 37% to $1.37 billion and operating profit plummeted 40% to $1.6 billion. Total revenue rose 12% to $28.1 billion, beating forecasts of $26.4 billion, driven by a delivery surge to 497,099 vehicles, but skyrocketing costs and new U.S. tariffs cast a long shadow over the results.

The sales boom was fueled by a rush to snag a $7,500 U.S. EV tax credit before its September 30 expiration, temporarily juicing Tesla’s automotive segment. Yet, automotive revenue grew just 6% to $21.2 billion, dragged down by lower average selling prices and a 50% spike in operating expenses to $3.4 billion. Chief Financial Officer Vaibhav Taneja blamed a $400 million hit from President Donald Trump’s tariff overhaul, which stung both auto and energy storage units. “Competition and tariffs are tough headwinds,” Taneja noted, as rivals like BYD and Volkswagen chip away at Tesla’s market share, particularly in a weakening European market.

Musk, undeterred, shifted focus to Tesla’s futuristic bets, hyping the Optimus humanoid robot as potentially “the biggest product ever” and teasing production lines for a 2026 launch. He also pushed Tesla’s robotaxi rollout, launched in Austin with 10-20 vehicles in June, with plans to expand to 8-10 cities by year-end, pending regulatory nods to remove human safety drivers. The Bay Area rideshare, semi-autonomous, holds test permits in Arizona and Nevada, but scaling remains uncertain. Regulatory credits added $417 million, slightly down due to Trump’s emissions policy shifts, while energy storage hit a record 12.5 GWh deployed, though tariffs bit into margins.

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Musk’s earnings call doubled as a soapbox for his contentious $1 trillion compensation package, up for a shareholder vote next month. “I need control to build the robot army,” he quipped, tying it to Tesla’s AI ambitions, including AI5 chip partnerships with Samsung and TSMC. Critics, including unions via the “Take Back Tesla” campaign, decried the plan as excessive amid sagging profits. With analysts projecting an 8.5% delivery drop for 2025, Musk dismissed concerns, banking on autonomy and software to unlock “incredible value.” Capital spending is set to soar in 2026 for Cybercab, Semi, and Megapack 3 production, but vague timelines left investors skeptical.

Shares slid 3.8% in after-hours trading, reflecting Wall Street’s growing unease. “Tesla trades like an AI platform but reports like a carmaker,” said Haris Khurshid of Karobaar Capital. Garrett Nelson of CFRA flagged “lingering uncertainty” on growth drivers, while Olivier Blanchard of The Futurum Group called Tesla “out of runway,” citing unproven robotaxi scale and fierce competition. With pricier EVs post-tax credit and policy headwinds mounting, Tesla’s EV dominance is wobbling.

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