Tesla July-September operating profit falls 56% on weaker EV sales and AI spending
In short
Tesla reported on the 21st that operating profit for July-September fell 56% from a year earlier to $718 million, Nikkei reported, citing fewer EV sales and higher up-front investment in areas such as AI. Bloomberg said adjusted earnings per share beat forecasts while revenue and capital spending fell short.
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Tesla's operating profit for July-September 2026 fell 56% from a year earlier to $718 million (about 113.5 billion yen), Nikkei reported from New York. The company announced the results on the 21st. Nikkei attributed the fall to lower EV sales and higher up-front investment in areas such as artificial intelligence. Free cash flow was positive for the first time in two quarters. [ 1 ]
NHK reported that Tesla's net profit for the three months to September was down 43% from the same period a year earlier, and also cited up-front investment in AI development. The two outlets cite different profit measures, and the documents do not reconcile them. [ 3 ]
Bloomberg, in a report carried by TBS NEWS DIG, said profit beat analyst forecasts while revenue did not. Adjusted earnings per share were 48 cents against an average forecast of 44 cents. Revenue was $28.05 billion, slightly below forecasts. Shares were down less than 1% in after-hours trading at 5:14 pm New York time (6:14 am on the 22nd in Japan) and were down 14% for the year to the close on the 21st. [ 2 ]
Capital spending in the quarter was $4.73 billion (about 750 billion yen), well below the $7.95 billion average forecast compiled by Bloomberg. Spending of $8.3 billion in January-June, plus the latest quarter, is below the pace needed to reach this year's target of more than $25 billion, Bloomberg said. Harisu Kurushido (ハリス・クルシド), chief investment officer of Karobaru Capital (カロバール・キャピタル), said a spending decline is positive only if it does not sacrifice future growth, and that he wanted to know whether the spending was merely shifting between quarters or whether production increases were taking longer than expected. [ 2 ]
Bloomberg tied the spending to Elon Musk's plan to turn Tesla from an EV maker into an AI and robotics company. It said this shift is seen as a central reason for a possible merger with SpaceX. Musk said on a SpaceX investor call on the 20th that both companies had set up special committees to consider a merger and that no agreement had been reached. He said he was not allowed to take part in the talks but supported combining the companies, and he warned that the deal might not happen because it needs the support of a majority of Tesla shareholders. Tesla's results material gave no further detail on the SpaceX merger. [ 2 ]
Tesla said its passenger-car order backlog at the end of the third quarter was the highest in four years and that battery supply was a constraint. It said it had secured new financing and credit lines of $30 billion. Driver-assistance software subscriptions were taken by more than 75% of new vehicles delivered in North America, and the software won approval in four more European countries. Tesla expanded its robotaxi fleet and operating hours but has not entered a new city since July, Bloomberg reported. [ 2 ]
Why it matters
The results show Tesla spending on AI and related businesses while EV sales decline, and Bloomberg links that shift to the possible merger with SpaceX that Elon Musk confirmed this week. Bloomberg reported that capital spending was well below analyst forecasts and below the pace needed for the company's annual target.
Key facts
- Tesla announced its July-September 2026 results on the 21st. [ 1 , 2 , 3 ]
- Operating profit fell 56% year on year to $718 million (about 113.5 billion yen), Nikkei reported. [ 1 ]
- NHK reported that net profit for the three months to September fell 43% from a year earlier. [ 3 ]
- Adjusted earnings per share were 48 cents against an average analyst forecast of 44 cents; revenue was $28.05 billion, slightly below forecasts, Bloomberg reported. [ 2 ]
- Capital spending was $4.73 billion, against an average analyst forecast of $7.95 billion compiled by Bloomberg. [ 2 ]
- Free cash flow was positive for the first time in two quarters, Nikkei reported. [ 1 ]
- Tesla said its passenger-car order backlog at the end of the quarter was the highest in four years and that battery supply was a constraint. [ 2 ]
Confirmed by several sources
Still unclear
- Whether the shortfall in capital spending reflects timing or slower-than-expected production increases. Bloomberg quoted Harisu Kurushido (ハリス・クルシド), chief investment officer of Karobaru Capital (カロバール・キャピタル), saying he wanted to know which it was; the documents do not answer.
- Whether Tesla and SpaceX will merge. Bloomberg reported Musk said no agreement had been reached, special committees have been set up, and the deal needs the support of a majority of Tesla shareholders, so it might not happen.
- The size of the profit decline. Nikkei reported a 56% fall in operating profit while NHK reported a 43% fall in net profit; the documents do not reconcile the two measures.