Tesla Delivers Record Cash—but Musk’s Margin Squeeze and Robotaxi Delays Jolt Investors Ahead of Crucial Vote

Tesla’s third-quarter 2025 results were solid on the top line but disappointing on profitability, as record free cash flow and revenue growth were offset by continued pressure on margins and a modest EPS miss. Deliveries, production, and free cash flow all reached new highs, but investors zeroed in on the company’s gross margin recovery, slow progress in self-driving deployment, and upcoming shareholder vote on Elon Musk’s compensation and board re-elections.

Revenue rose 12% year over year to $28.1 billion, topping consensus expectations of $26.4 billion. Automotive revenue climbed to $21.2 billion, aided by strong U.S. and European sales as buyers rushed to take advantage of EV tax credits before phase-outs. Energy generation and storage revenue jumped roughly 20% to $3.2 billion, driven by Megapack deployments and the Powerwall 3 rollout. However, EPS of $0.50 missed the $0.54 estimate, as gross margins and operating margins continued to compress. Goldman Sachs analyst Mark Delaney called the report “mixed,” maintaining a Neutral rating and a $400 price target, noting that while revenue exceeded expectations, margins and EPS fell short.

Tesla’s deliveries came in at approximately 490,000 vehicles, up 9% year over year and up sequentially despite retooling downtime for the refreshed Model 3 and new manufacturing lines. Production reached 505,000 vehicles, showing stable utilization across Fremont, Shanghai, Berlin, and Austin. The Model Y remained Tesla’s volume leader, while the upgraded Model 3 is now ramping in both the U.S. and China. Musk reiterated that capacity should reach 3 million units “within 24 months, maybe sooner,” as supply chains normalize.

Margins remained the weak spot of the quarter. Automotive gross margin excluding regulatory credits was 15.4%, improving modestly from 15% in Q2 and 12.5% in Q1 but still well below the company’s historic 20% plus levels. The improvement reflected cost reductions and efficiency gains but was limited by persistent pricing pressure and rising operating expenses tied to AI and robotics investments. Overall gross margin was 18% versus 17.2% expected, while operating margin fell to 5.8%, down 500 basis points year on year. Tesla’s operating income declined 40% to $1.6 billion, even as free cash flow soared to a record $3.99 billion thanks to tighter working-capital management and lower inventory. The company ended the quarter with $41.6 billion in cash, up $4.9 billion sequentially, leaving it in an enviable liquidity position even as CapEx rose to $2.9 billion for the quarter and is projected to total $10–11 billion in 2025.

Tesla’s guidance remains measured. Management expects Q4 deliveries to be flat to slightly up sequentially and sees full-year 2025 revenue growth of 8–10%. Spending will accelerate in 2026 as the company pushes toward volume production of the Cybercab, Tesla Semi, and Megapack 3. Musk reaffirmed his long-term target of “millions of autonomous Teslas” on the road by late 2026, emphasizing that the company remains committed to expanding its manufacturing footprint as rapidly as supply conditions allow.

In the self-driving and AI arena, Tesla said the long-awaited FSD version 13 is “imminent,” representing a full architectural shift to end-to-end neural networks trained on video rather than discrete perception modules. Cumulative FSD miles driven have now surpassed 2 billion, though the growth rate has flattened—1.1 billion in both June and September—indicating steady but not accelerating adoption. Musk said Tesla remains “very cautious” with rollout, expecting driverless operations in large parts of Austin by year-end pending regulatory approval, and to expand to 8–10 metro areas in 2026. Analysts such as Gene Munster called the update “positive but slower than hoped,” noting that investor disappointment over the robotaxi timeline contributed to post-earnings weakness in the stock.

On the robotics front, Musk confirmed that first-generation production lines for the Optimus humanoid are being installed, with the goal of limited production and internal deployment beginning in 2026. Two Optimus units are already operating inside Tesla’s Fremont logistics center performing autonomous tasks. The Dojo AI-training supercomputer continues to scale, with additional clusters coming online in New York and Texas and full throughput expected by mid-2026. Tesla said the Dojo’s efficiency is now comparable to that of third-party GPU clusters, a key milestone toward lowering long-term AI training costs.

The company also highlighted progress in xAI, Musk’s external AI venture behind the Grok model. Musk said xAI and Tesla are approaching AI from “different angles,” with Grok focusing on general intelligence and Tesla optimizing lightweight models for real-time, on-device autonomy. Grok 5 will run on Nvidia’s GB500 chips, while Tesla’s automotive inference models are about 5% the size of Grok. Musk hinted that the two systems may eventually converge, leveraging Tesla’s hardware and xAI’s large-model research.

Tesla’s Energy segment remains a bright spot. Energy storage deployments climbed sharply, anchored by Megapack 3 installations and growing Powerwall 3 sales. The division’s ~20% year-over-year revenue growth underscores its expanding contribution to Tesla’s overall profitability, even as auto margins sag. Management reaffirmed that energy products, alongside autonomy and robotics, form the company’s “three-pillar” growth strategy beyond vehicle sales.

Elon Musk devoted a portion of the shareholder call to the upcoming November 6 special meeting, where investors will vote on his compensation package and board re-elections. “This meeting will shape the future of Tesla,” he said, arguing that the proposals are less about pay and more about ensuring he maintains sufficient voting control to execute the company’s long-term strategy. Musk criticized proxy advisors ISS and Glass Lewis for “terrible recommendations” and warned that excessive influence from passive index funds effectively hands control to these firms. “That’s a fundamental problem,” he said, calling on shareholders to “support my leadership through the two compensation proposals and the re-election of Ira, Kathleen, and Joe to the board.”

The stock traded roughly 4% lower after hours as investors digested the slower-than-expected robotaxi rollout, cautious FSD adoption, and margin pressures. Still, the quarter showcased Tesla’s balance-sheet strength, surging cash generation, and continued progress across its AI, energy, and robotics ambitions. Goldman Sachs summarized the setup succinctly: near-term volatility is likely ahead of the Nov. 6 vote and robotaxi updates, but the longer-term story still depends on how quickly Tesla can turn autonomy and Optimus from promise into profit.