Tesla reported a 37% drop in profit for the third quarter of 2025, even though its revenue hit a record $27.4 billion, showing the pressure from ongoing price cuts and rising production costs.
The electric carmaker’s net income fell to $2.1 billion, down from $3.3 billion a year earlier. Despite strong global sales, Tesla’s profit margins were hurt by cheaper EV prices and increased expenses for new product launches and AI initiatives.
Price Cuts Take a Toll
Tesla has been cutting prices across major markets like the U.S., China, and Europe to stay competitive against brands like BYD, Hyundai, and Rivian. While these cuts boosted sales volume, they reduced per-vehicle profits.
The company’s gross margin slipped to 15.4%, down from 18.2% last year. Analysts say Tesla’s long-term profitability depends on how quickly it can scale its autonomous driving and AI software businesses.
Elon Musk’s Comment
CEO Elon Musk said Tesla remains focused on building “the most advanced AI-driven vehicles in the world.” He added that the company will prioritise next-generation models and robotaxi technology in the coming quarters.
“We are playing the long game. Revenue growth is strong, and we’re investing aggressively in AI and robotics,” Musk said during the earnings call.
Stock Reaction
Following the earnings announcement, Tesla’s shares dropped 6% in after-hours trading as investors expressed concerns about declining margins and rising R&D expenses.
Despite the short-term dip, analysts believe Tesla’s AI and energy divisions could be key growth drivers in 2026 and beyond.
Summary Table
| Particulars | Details (Q3 2025) |
|---|---|
| Company | Tesla Inc. |
| Quarter | Q3 2025 |
| Revenue | $27.4 billion (up 10% YoY) |
| Net Profit | $2.1 billion (down 37% YoY) |
| Reason for Profit Fall | Higher costs, EV price cuts, and lower margins |
| Gross Margin | 15.4% (vs 18.2% last year) |
| Deliveries | 485,000 vehicles |
| CEO Comment | Elon Musk said focus remains on AI and next-gen EVs |
| Stock Movement | Shares fell 6% after earnings release |
