Tesla's Q3 Revenue Flatlines Amid AI Pivot and SpaceX Merger Talks
AI-generated image · US National Wire · Based on a photo by Steve Jurvetson from Menlo Park, USA (CC BY 2.0, Wikimedia Commons)
Despite a flashy Roadster demo, Tesla's core automotive and energy revenues are sliding as capital expenditures soar.
Tesla reported Q3 2026 earnings that reveal a stalling core business, according to reporting from The Verge. The company posted $28.0 billion in revenue—flat compared to the $28.1 billion earned in Q3 2025—and a net income of $1.7 billion. While this exceeded LSEG's Wall Street expectations of $27.9 billion, it fell short of Tesla's own internal projection of $28.3 billion.
The company's primary revenue engines are showing signs of distress. Automotive revenues dropped 3 percent year-over-year to $20.5 billion, following a 2.1 percent decline in customer deliveries. Energy generation and storage revenue saw a more severe 16 percent year-over-year drop to $2.9 billion. The sole bright spot was "services and other revenue," which climbed 33 percent to $4.6 billion.
As revenue flatlines, spending is surging. Tesla's capital expenditures (capex) jumped 110 percent year-over-year to $4.7 billion as CEO Elon Musk pushes a transition toward AI, robotics, and autonomous vehicles. Operating expenses rose 39 percent to $4.8 billion, contributing to a 56 percent year-over-year plunge in income from operations, which fell to $718 million. Free cash flow also dropped 62 percent year-over-year to $1.5 billion.
Amid these financials, Musk has introduced high-concept distractions. The company recently held a demo in Waco, Texas, for a next-generation Roadster featuring SpaceX cold-gas thrusters, though skeptics remain regarding its promised 2028 production date. Additionally, Musk revealed that Tesla and SpaceX have formed special committees to discuss a potential merger, a move Musk described as a "good idea."