Tesla Revenue Beats Estimates Amid Delivery Rebound, AI Spending Impact

Elon Musk's Tesla exceeded Wall Street's third-quarter revenue projections, driven by a resurgence in vehicle deliveries and expansion in its energy storage sector. The company reported $28.05 billion in revenue for the three months ending September 30, slightly surpassing the average analyst estimate of $27.88 billion and marking a marginal decrease from the $28.10 billion recorded in the same quarter last year. The results were released as discussions continue regarding a potential merger with SpaceX.

Tesla's capital expenditures for the third quarter were $4.73 billion, significantly lower than the anticipated $7.5 billion. This figure represents a decrease from the $5.79 billion in the second quarter and a substantial increase from the $2.25 billion reported a year prior. Free cash flow for the quarter was $1.53 billion, contrasting with an expected cash burn of $4.92 billion.

The company delivered 486,532 vehicles in the third quarter, outperforming the Wall Street expectation of approximately 461,100 vehicles, although this represents a slight year-over-year decline of about 2%. Deliveries surpassed production by over 22,000 units for the second consecutive quarter, leading to an inventory reduction. Analysts project total deliveries to reach around 1.77 million for the current year.

The Model 3 and Model Y constituted the majority of deliveries, with other models, including the Cybertruck, accounting for 8,295 units, a decrease from the previous quarter. Tesla is reportedly phasing out production of the Model S and Model X at its Fremont facility to make way for its Optimus robot production lines.

Despite increased competition from global manufacturers introducing newer, often more affordable models, Tesla's core automotive business is under observation. The company has stated it has surpassed 10 million cumulative vehicle deliveries, with the Model Y on track to become the world's best-selling vehicle this year. To bolster demand, Tesla has introduced less expensive versions of its popular models and a six-seater Model Y in the U.S. in July. However, demand in the U.S. has been affected by the expiration of tax credits.

Investors are closely watching for tangible progress in Musk's ventures into self-driving technology and robotics. Tesla recently reported its Cybercab fleet in Austin had expanded to over 300 vehicles from fewer than 40 in about a month, with Dallas being the next city for expansion. The company also launched unsupervised robotaxi services in Miami, Orlando, and Tampa in July, following earlier launches in Dallas and Houston.

Tesla's energy division is increasingly significant, providing a counterbalance to its automotive operations. Demand for grid-scale batteries from renewable energy developers and data centers has fueled growth in this sector. The company has indicated that existing tariff structures may have a more pronounced impact on its energy business than its automotive sector.