Tesla Posts $718 Million Operating Income as AI Spending Cuts Profit

Tesla reported $718 million in operating income for the third quarter of 2026. The figure was released after market close. It marks a 56% drop compared with the same period last year. The company stated that rising spending on artificial intelligence and its Optimus robot program outpaced gross profit growth. Tesla's operating margin for the quarter was 2.6%. This compares to 1.4% in the second quarter and 5.8% a year ago.

The company reported $28.05 billion in revenue for the quarter ending September 2026. This was flat with revenue from a year prior. Tesla delivered 486,532 vehicles during the period. Deliveries were down 2.1% year-over-year. The company stated that battery availability was the limiting factor in increasing auto volumes during the quarter.

Tesla reported $0.48 in non-GAAP earnings per share. This figure beat analyst expectations of $0.45 per share. It was still down 4% from $0.50 a year ago. On a GAAP basis, net income was $787 million, or $0.22 per share. This represented a 43% decline from the prior year. Total gross margin improved to 19.6%, up from 16.8% in the second quarter.

Operating expenses for the quarter totaled $4.78 billion. This was an increase of 39% compared with a year ago. Research and development spending rose 69% to $2.76 billion. Tesla attributed this to investments in 'Super Intelligence,' Optimus, and the Cybercab. Stock-based compensation reached $1.17 billion, up from $663 million in the third quarter of 2025.

Capital spending was $4.73 billion in the third quarter. This was more than double the $2.25 billion spent a year ago. For the first nine months of 2026, total capital spending reached $13.01 billion. Management had previously guided for spending of more than $25 billion for the full year. Tesla ended the quarter with $45.4 billion in cash and investments.

Tesla reported a 33% increase in revenue for its services and other segment. This portion of the business generated $4.61 billion in revenue. Tesla stated that gross profit for the segment reached a record $734 million. This growth came from charging, insurance, and parts sales.

The company is scheduled to hold its earnings call with management at 5:30 p.m. ET. Tesla did not update its capital spending guidance for the remainder of 2026. The company did not provide a new projection for when it expects to reach positive free cash flow. Future quarters will be watched for trends in operating income and capital expenditures.