What Tesla (TSLA) Said on Its Q3 Earnings Call

Key Points

• Vehicle demand remained strong: Tesla said demand exceeded production, with more than 480,000 deliveries for the second consecutive quarter and a four-year-high backlog. Paid FSD subscriptions increased, while automotive gross margin excluding regulatory credits rose to 18.1%.
• Energy storage and investment expanded: Tesla deployed 13.7 gigawatt-hours of storage, nearly sold out Megapack production for 2027 and reported a 33.1% energy gross margin. The company raised its full-year capital expenditure outlook to approximately $20 billion and ended the quarter with more than $45 billion in cash and investments.
• Robotaxi, Optimus and chip initiatives advanced: Tesla rapidly expanded its Austin Robotaxi fleet and plans to launch Cybercab service in Dallas next month. It is also building Optimus production capacity and expects to begin testing chips at its Austin Terafab facility next year, though these projects will drive higher operating expenses before commercialization.

Tesla NASDAQ: TSLA said demand for its vehicles exceeded production in the third quarter of 2026, with executives pointing to Full Self-Driving software, energy storage demand and early Robotaxi operations as central drivers of its growth plans.

Chief Executive Officer Elon Musk said the company was ramping vehicle output and targeting annual production of about 5 million vehicles by approximately 2030. Tesla also began production of its Semi truck during the quarter and said it had begun early production work on a high-volume Optimus humanoid robot line in Fremont, California.

“Demand is growing rapidly for our vehicles,” Musk said, adding that the company was producing and delivering as many vehicles as it could. He characterized Full Self-Driving, or FSD, as the largest demand driver for Tesla vehicles.

Vehicle demand, FSD adoption and margins

Chief Financial Officer Vaibhav Taneja said Tesla recorded its second consecutive quarter with vehicle deliveries exceeding 480,000 units. The company ended the period with its highest vehicle backlog in four years, with deliveries primarily constrained by production capacity, he said.

The Model Y set delivery records in several markets, according to Taneja. Based on preliminary company data, Tesla believes the Model Y was Europe’s best-selling battery-electric vehicle and South Korea’s best-selling passenger car during the quarter. Tesla also reported records in Australia, Japan and Taiwan.

More than 75% of North American deliveries included a paid FSD subscription signup at delivery in the third quarter, Taneja said, up approximately 20% from the prior quarter. Tesla said it had more than 1.7 million paid FSD customers globally, with subscriptions accounting for 50% of that total for the first time.

Automotive gross margin excluding regulatory credits rose sequentially to 18.1% from 16.3%. Taneja attributed the improvement to a higher mix of deliveries in the Asia-Pacific region, though he said commodity cost increases and interest-rate changes remained headwinds.

Tesla is seeking additional approvals for FSD in international markets. Musk said the company had received approval in several European countries and hoped for a broader European Union approval within months, though he cautioned that the timing was outside Tesla’s control. Taneja said the company was also working with regulators in China to gain broader FSD approval.

Energy storage demand and capital spending

Tesla deployed 13.7 gigawatt-hours of energy storage in the quarter, its second-best quarterly deployment result, according to Taneja. The company also began delivering Megapacks equipped with its in-house lithium iron phosphate batteries.

Energy gross margin increased to 33.1% from 20.4% sequentially. Taneja said the gain was primarily related to tariff refunds recognized in the quarter and warranty adjustments related to cell costs expected to be reimbursed by a supplier.

Musk said Tesla was nearly sold out of Megapacks for 2027 and was increasing production as quickly as possible. Executives cited strong demand from data centers and said they expected average selling prices and margins in the business to improve as the company expanded output.

Tesla reported positive free cash flow of more than $1.5 billion and ended the quarter with more than $45 billion in cash and investments. It revised its full-year capital expenditure outlook to approximately $20 billion, citing capital-deployment management. The company also secured capacity to borrow up to $30 billion to support expected future capital spending, although Taneja said Tesla did not plan to draw from those facilities during the current calendar year.

Operating expenses increased sequentially due largely to research and development, added artificial intelligence compute, chip development and pre-production costs for Optimus, Megapack 3 and the Semi, Taneja said. Tesla expects operating expenses to continue increasing until those products are commercialized.

Robotaxi expansion and Cybercab production

Tesla said its Austin Robotaxi operation expanded rapidly during the quarter. Musk said the Cybercab fleet in Austin had grown tenfold since its launch roughly a month earlier, while Taneja said cumulative unsupervised miles increased eightfold during the quarter amid double-digit weekly growth.

Ashok Elluswamy, Tesla’s vice president of AI, said the company planned to launch Cybercab service in Dallas next month and intended to expand to additional cities using the same software employed by its Model Y Robotaxis. He said the company was working toward broader operational availability, including later-night service, higher-speed roads and more weather conditions.

Taneja said Tesla was not yet at its target cost of $0.30 per paid Robotaxi mile but saw a path to achieving it through larger-scale fleet operations. Musk said Robotaxi would not materially affect results in the current quarter, but could become noticeable to revenue and profitability in the second quarter of next year and potentially become more significant by the third or fourth quarter.

Lars Moravy, vice president of vehicle engineering, said Cybercab has 50% fewer parts than any previous Tesla vehicle. While its listed production-line capacity exceeds 125,000 vehicles annually, he said the line’s actual capacity was “significantly higher.” Tesla is currently producing Cybercabs at a rate aligned with the needs of its internal Robotaxi fleet.

Optimus and chip manufacturing plans

Musk said Tesla had landed most equipment for a Fremont Optimus production line designed for an annualized rate of 20,000 units per week, though reaching that rate would likely take at least a year. He said the company was still refining the robot’s design, reliability and artificial intelligence capabilities, with the hands and fingers representing a particularly challenging hardware area.

Tesla expects to begin delivering Optimus units to external companies around the end of next year, initially for industrial, dangerous, repetitive or around-the-clock work, Musk said. The company is also building a larger Optimus factory in Austin.

Meanwhile, Tesla expects to begin commissioning machinery at its Austin-based Terafab research facility in the first half of next year and aims to produce an initial test chip around May or June. Musk said useful chip production at volume is targeted for the third quarter of 2028. He estimated Terafab capital equipment investment would be in the tens of billions of dollars through early 2028 and could exceed $100 billion over the longer term.

About Tesla (NASDAQ:TSLA)

Tesla, Inc is an electric vehicle and clean energy company headquartered in Austin, Texas. Founded in 2003, the company designs, manufactures and sells electric vehicles, including the Model S, Model 3, Model X, Model Y and Cybertruck. Tesla also develops vehicle software, driver-assistance features and related services intended to support the operation and ownership of its vehicles.

Beyond automobiles, Tesla produces energy storage products for residential, commercial and utility-scale applications, including the Powerwall and Megapack.

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