Tesla (TSLA) stock was volatile in after-hours trading following the release of its third-quarter results. The EV maker delivered record revenue and free cash flow despite a sharp 31% decline in the bottom line. The quarter was marked by strong Q3 global vehicle deliveries as buyers rushed to claim the expiring federal EV tax credit; however, rising costs weighed on margins.
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The company delivered Q3 adjusted earnings per share of $0.50, which missed the analysts’ consensus estimate of $0.55 per share. Also, the bottom line declined 31% on a year-over-year basis.
Meanwhile, the company’s Q3 revenue rose by 12% year-over-year to $28.1 billion and surpassed the analysts’ estimates of $26.33 billion. The upside was primarily due to higher global vehicle deliveries and growth in energy generation and storage revenue, partially offset by lower regulatory credit revenue.
During Q3, Tesla’s free cash flow surged to a record high of $3.99 billion compared to $146 million in the previous quarter. This reflects a substantial increase quarter-over-quarter, driven by higher revenues and better cost management. Also, it points to the company’s ability to fund its roadmap and expansion plans.
On the margin front, Tesla’s operating margin contracted to 5.8% in Q3 from 10.8% in the year-ago quarter. The fall was attributed to increased investment in AI and R&D, and higher average vehicle costs due to tariffs, sales mix, and lower fixed cost absorption.
Outlook
Looking ahead, Tesla reaffirmed its focus on scaling existing production before building new factories. Also, the company noted that volume production for Cybercab, Tesla Semi, and Megapack 3 remains on track for 2026. Further, TSLA said it is making efforts to lower manufacturing and operating costs.
On the AI front, TSLA said that first-generation production lines for its humanoid robot, Optimus, are being installed.
Regarding profit, the company stated, “While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware related profits to be accompanied by an acceleration of AI, software and fleet-based profits.”
Is TSLA Stock a Buy?
Turning to Wall Street, TSLA stock has a Hold consensus rating based on 15 Buys, 13 Holds, and 10 Sells assigned in the last three months. At $365.82, the average Tesla price target implies a 16.43% downside risk. The stock has gained 76.5% over the past six months.
It must be noted that analysts may update their price targets for TSLA stock after this earnings report.
