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Tesla stock (TSLA) tumbled around 6% at open on Thursday, following a disappointing third-quarter earnings report that revealed a significant profit decline despite achieving record revenue.

The company reported adjusted earnings of 50 cents per share, below Wall Street’s estimate of 54 cents, making it the fourth quarter in a row that it has fallen short.

Revenue, on the other hand, jumped 12% from a year ago to $28.1 billion, beating expectations of $26.37 billion.

But the good news stopped there: net income dropped 37% to $1.4 billion, painting a much weaker picture on the profit side.

Tesla stock: What’s behind subdued Q3 earnings?
 

Tesla’s profit deterioration stemmed from multiple pressure points that overwhelmed the revenue gains from increased deliveries.

The electric vehicle maker witnessed a considerable surge of 50% in its operating expenses to $3.43 billion, primarily due to aggressive investments in artificial intelligence, autonomous driving technology, and robotics research and development.

At the same time, the operating income of Tesla plunged 40% year-over-year to $1.6 billion, resulting in an operating margin of just 5.8%, a significant contraction from previous quarters.

​Carbon credit revenue, which has long been a reliable moneymaker for Tesla, fell 44% to $417 million, the lowest in two years and the fifth straight quarter of declines.

That drop is largely tied to the Trump administration scrapping penalties for automakers who miss emissions targets, which effectively shut down the once-lucrative credit market that brought Tesla $2.76 billion in 2024 alone.

On top of that, tariffs added roughly $400 million in extra costs this quarter, squeezing profits even further.

Gross margins also slipped to 18% from 19.8% a year ago, a far cry from the 25% levels Tesla used to hit during its most profitable years.

Automotive gross margin specifically declined to 15.4%, below analyst expectations of 16.3%, due to lower vehicle pricing, reduced fixed cost absorption for certain models, and an unfavorable sales mix.

Can Tesla stock bounce back?
 

The opinion on Wall Street remain mixed about Tesla stock’s future as some analyst continue to maintain a bullish rating, while others are looking at an uncertain path ahead amid rising competition and CEO Elon Musk’s unpredictable moves.

After the Q3 earnings, Deutsche Bank reiterated its ‘Buy’ rating on Tesla stock and raised its price target to $440 per share from $435.

A few other analysts have chimed in on Tesla recently. The Royal Bank of Canada bumped up its price target from $325 to $500 and rated the stock “outperform” in a report published October 10.

Truist Financial also lifted its target, going from $280 to $406, though they kept their rating at “hold” in a report released Thursday.

However, Goldman Sachs issued a more cautious assessment, describing the report as “mixed to slightly negative relative to some focus areas for investors” and noting that certain key performance indicators fell below expectations.

The firm maintained its Neutral rating, expressing measured expectations for profits from Tesla’s autonomy and robotics initiatives.

Barclays, Cantor Fitzgerald, and TD Cowen also weighed in, with sentiment tilting toward concerns about near-term demand sustainability following the tax credit expiration.

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