Tesla has reported record-breaking revenue in the third quarter of 2025, even as profits declined sharply compared to the previous year. The company generated $28.1 billion in total revenue, a 12 percent year-over-year increase, driven by record vehicle deliveries and strong growth in its energy storage business.
Despite this, net income fell to $1.4 billion (GAAP), down 37 percent from a year earlier, while operating income declined 40 percent to $1.6 billion, reflecting thinner margins and higher costs.
Record Deliveries and Growing Energy Segment
Tesla delivered just under half a million vehicles during the quarter, marking the company’s highest quarterly total ever. The strong performance was largely driven by demand in the U.S. ahead of the expiration of the federal electric vehicle tax credit.
Tesla’s energy generation and storage division also saw significant expansion, with deployments reaching new highs. Revenue from energy generation and storage jumped 44 percent year-over-year to $3.4 billion, while services and other segments rose 25 percent.
Tesla said this performance helped offset declines in regulatory credit revenue and one-time software recognition related to previous Full Self-Driving releases.
Profit Margins Under Pressure
While revenue hit an all-time high, profitability continued to slide. Tesla’s gross margin fell to 18 percent, down from 19.8 percent a year ago, as the company absorbed higher average vehicle costs, increased tariffs, and a less favourable product mix. Price reductions across multiple models also contributed to the squeeze on margins.
The automaker noted that operating expenses increased 50 percent year-over-year, driven by rising investments in artificial intelligence, new product development, and general and administrative costs.
Strengthening Cash Position
Despite the pressure on earnings, Tesla’s cash flow and balance sheet strengthened significantly. The company generated $6.2 billion in operating cash flow and nearly $4.0 billion in free cash flow, both record highs. Tesla ended the quarter with $41.6 billion in cash and investments, an increase of $4.9 billion from the prior quarter.
Looking Ahead
Tesla continues to emphasize long-term growth despite near-term headwinds from tariffs and changing trade policies. The company launched several new products during the quarter, including the Model Y L, Model Y Performance, and new Standard versions of the Model 3 and Model Y, designed to make EV ownership more accessible. In its energy business, Tesla unveiled the Megapack 3 and Megablock, next-generation systems aimed at reducing installation costs and improving scalability for large battery projects.
