Tesla shares fall more than 3% despite earnings beat and $1.5B in free cash flow

Tesla's stock experienced a significant drop of over 3% in after-hours trading following the release of its earnings report for the fiscal third quarter. Despite beating earnings expectations, the shares fell as the news came in. The company reported adjusted earnings of 48 cents per share, slightly below analyst estimates of 45 cents, while revenue came in flat at $28.05 billion compared to the previous year.

Analysts had projected revenue of $28.34 billion. Tesla managed to generate $1.53 billion in free cash flow during the quarter, largely due to capital spending being $3 billion lower than expected. However, operating income fell by 56% to $718 million, with operating expenses rising by 39%, primarily due to increased research and development spending.

Net income for the quarter dropped 43% to $787 million on an unadjusted basis. Automotive revenue saw a 3% decline to $20.56 billion, and deliveries totaled 486,532 vehicles, a 2% decrease. Tesla's backlog of orders for passenger vehicles grew to the highest level in four years due to battery supply limitations. The company's Cybercab robotaxis, which began operating in Austin in September, now have over 1.74 million active subscriptions, a 67% increase from the previous year.

Tesla expects to start delivering Optimus humanoid robots to external customers around the end of next year, with production currently at 20,000 units per week. The company cut its capital spending forecast for 2026 to $20 billion, down from previous estimates of over $25 billion.