Flying Roadsters can’t lift Tesla’s flat Q3 revenues

As the smoke clears from its outrageous Roadster demo, Tesla reported Q3 earnings on Wednesday — and the cold reality is that revenue has flatlined.

Tesla said it earned $1.7 billion in net income on $28.0 billion in revenue in the quarter that ended in September 2026. Revenues were flat, while profits dropped 4 percent compared to the third quarter of 2025, when the company earned $1.4 billion in net income on $28.1 billion in revenue. Tesla’s revenue came in above Wall Street expectations of $27.9 billion, according to data compiled by LSEG. Tesla’s own company-compiled expectations predicted Q3 revenues of $28.3 billion.

The earnings come on the heels of a disappointing Q3 sales report, in which Tesla reported a 2.1 percent drop in customer deliveries compared to the blockbuster third quarter of 2025. (For a direct-to-consumer company like Tesla, deliveries are a proxy for sales.) The drop in sales was widely expected thanks to the expiration of the $7,500 federal tax credit for electric vehicles on September 30, 2025. Elon Musk himself said that the company was in for “a few rough quarters” thanks to the expiring incentive and other macroeconomic factors.

Tesla reported automotive revenues of $20.5 billion, a 3 percent decrease year over year — a sign that the company’s car business is floundering after the elimination of the tax credit. But there were troubling signs for Tesla’s other businesses too; the company reported $2.9 billion in energy generation and storage revenue, a staggering 16 percent drop year over year. “Services and other revenue,” such as money the company takes in from EV charging, maintenance, parts, and insurance, was up 33 percent to $4.6 billion – a rare bright spot in an otherwise dour earnings report.

Tesla’s capital spending — also known as capex — soared 110 percent year over year to $4.7 billion this quarter, as the company continue to pour money into AI, autonomous vehicles, and robotics. Musk has said to expect “a massive capex year” of at least $25 billion in capital spending as Tesla continues to transition into an AI and robotics company. But the company only spent $13 billion in the first three quarters of the year, suggesting that Tesla may fall short of that $25 billion target.

Operating expenses — the day to day costs of running Tesla’s business — was up 39 percent year over year to $4.8 billion, while its income from operations — the profit Tesla generates from those day-to-day dealings — was down 56 percent year over year to just $718 million.

On the brighter side, Tesla reported a free cash flow of $1.5 billion, after dipping into negative territory last year. Still, that figure represents a 62 percent drop year over year, a sign that Tesla’s operating revenues were still struggling to cover its capital expenditures.

The possibility of a Tesla-SpaceX merger gained new momentum after Musk’s revelation this week that the two companies had formed special committees to discuss the possibility. Musk said a merger would be a “good idea,” even though he claimed he wouldn’t be involved in the process.

Beyond merger talks, this past quarter also saw the highly anticipated re-reveal of the next-generation Tesla Roadster, nine years after it was initially announced. The demo in Waco, Texas, featured a redesigned two-seat prototype flying and flipping through the air using cold-gas thrusters provided by SpaceX. While the event generated its own cottage industry of online reactions, it did little to asauge skeptics that the vehicle would actually go into production in 2028, as promised.