Tesla's third-quarter results, published after the US market close on 21 October 2026, show a car business earning more on each sale while the company as a whole earns less. As in the second quarter, the reason is spending on AI, robots and new factories, which is growing far faster than revenue.
The numbers
Revenue was $28.05 billion, roughly flat on a year earlier and short of the about $28.34 billion analysts expected, according to Teslarati. Adjusted earnings per share of $0.48 beat the $0.45 consensus. The rest comes from Tesla's Q3 2026 shareholder letter:
| Metric | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenue | $28.05B | $28.10B | -0.2% |
| Gross margin | 19.6% | 18.0% | +1.6 pts |
| Operating margin | 2.6% | 5.8% | -3.2 pts |
| R&D spending | $2.76B | $1.63B | +69% |
| GAAP net income | $787M | $1.37B | -43% |
| Adjusted EPS | $0.48 | $0.50 | -4% |
| Free cash flow | $1.53B | $3.99B | -62% |
| Active FSD subscriptions | 1.74M | 1.04M | +67% |
Gross margin recovered to 19.6%, from 16.8% in the second quarter. Operating income still fell 56% to $718 million, because operating expenses rose 39% to $4.78 billion. Tesla attributes the rise to "SI and other R&D projects", stock-based compensation that includes Elon Musk's 2025 pay award, and overheads. Regulatory-credit revenue fell to $113 million from $417 million. Energy revenue dropped 16%, partly because of "tariff-related customer refunds". Services and other, which covers charging, insurance and parts, earned a record $734 million gross profit.
Batteries, not buyers
Tesla says "battery availability continued to be the limiting factor in increasing auto volumes" and that it ended the quarter with "the largest backlog for our passenger vehicles in four years". Deliveries of 486,532 were still 2% lower than a year earlier, and Tesla also cites a lower average selling price. Gigafactory Berlin set a production record, and vehicle pack capacity in Berlin is on Tesla's list of critical battery projects. The letter gives no volume guidance.
How FSD is counted
The 1.74 million FSD figure follows the definition in Musk's 2025 CEO Performance Award: it "includes both upfront payment and monthly subscriptions and excludes free trials". Owners who bought FSD outright therefore count as subscribers. Ten million active subscriptions is one of the award's milestones, Electrek notes. In North America, Tesla says more than 75% of new deliveries now include FSD, up nearly 20 percentage points in a quarter.
What the letter says about Europe
The letter carries Tesla's first Europe-wide usage figure for FSD (Supervised). The system is available in nine EU countries, four of them added since the end of June, the last being Slovakia. Tesla says the system is "used by over 100,000 customers logging more than 160 million kilometers since initial approval", which came in the Netherlands in April. Tesla does not split the figure by country or say how it treats free trials there.
The Supercharger network added more than 2,100 stalls in the quarter, reaching 84,465 connectors at 8,904 stations, 14% more than a year earlier.
Beyond cars
Robotaxi reached nearly two million cumulative unsupervised miles by the end of September, eight times the June figure, and Cybercabs have carried riders in Austin since 3 September. The Semi is in volume production in Nevada, Optimus production has begun on Fremont lines, and Megafactory Texas has started production with a planned 50 GWh a year. Tesla plans 400 MW of AI training compute by the end of the year and expects to start commissioning equipment at its Austin chip fab in 2027.