Tesla profits fall despite higher sales, hitting share price

Tesla reported that its third-quarter earnings plunged 37% to $1.4 billion (€1.18bn), from $2.2bn (€1.9bn) a year earlier — despite a rise in revenues.

That marked the fourth quarter in a row that profit dropped at Elon Musk's car company.

The sales boost came as a welcome relief after demand fell earlier in the year due to anti-Musk boycotts, although the news came with a significant caveat. Customers rushed to take advantage of a $7,500 federal EV tax credit before it expired on 1 October, possibly stealing sales from the current quarter.

Tesla's shares fell more than 3% in after-hours trading.

In a conference call with investors, Musk sought to shift attention away from selling cars to other businesses: its driverless robotaxi service, its AI product, and its Optimus robots for the home and factories.

"It'll seem so real that you'll need to poke it," he said of the Optimus, predicting that what he called a "robot army" will likely become "the biggest product of all time".

Musk also said he was confident enough in the robotaxi to remove "safety monitors" from the driver's seat by the end of the year in its first market, Texas. He added that the service, which is also available in San Francisco, will roll out to as many as 10 other metro areas by the end of the year.

Uncertain EV demand clouds Tesla’s outlook

The revenue surge, to $28.1bn (€24.2bn) from $25.2bn (€21.7bn), was not unexpected. Musk had announced earlier this month that sales of electric vehicles, one part of the multipronged business, rose 7% in the quarter after plunging for most of the year.

Tesla was also helped by surging sales from its separate battery storage and electric charging businesses, but the EVs still make up much of the overall revenue figures.

"It's a positive that they are increasingly diversifying from the auto business, but our primary concern is demand for EVs," Garrett Nelson, an analyst at CFRA Research, said. "There's a lot of uncertainty," he added.

A closely watched measure, gross margins, hit 18%, the highest for this year, but still a decline from a year ago. The figure, which shows how much money Tesla makes after paying staff, raw materials and other basic expenses, is also down from 25% four years ago as the company offers discounts and other incentives to combat rival EV makers that have been stealing market share.

Earnings excluding certain charges fell to 50 cents per share from 72 cents per share a year ago and below the 56 cents forecast by Wall Street analysts.

Musk was predicting 20% to 30% sales growth for 2025 at this time last year, but it hasn't turned out that way.

In addition to alienating potential customers with his embrace of right-wing politicians, sparking boycotts in key markets in the US and abroad, he also has failed to shake up his vehicle line-up with a new, exciting model or introduce a substantially cheaper car to appeal to more buyers.

When he finally revealed two cheaper offerings earlier this month — stripped-down versions of the Model Y and Model X — investors were unimpressed because the discount didn't seem deep enough. They both cost slightly less than $40,000 (€35,000), much higher than expected.

One Musk watcher on Wall Street was undeterred by the quarterly report.

"It's nice to have revenue come back," said Brian Mulberry, a senior client portfolio manager at Zacks Investment Management. "There is still strong demand for Teslas."