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Tesla Shares Drop After Weak Profit & Cost Concerns
Shares of Tesla, Inc. fell sharply this week after the company’s third-quarter earnings showed strong revenue but weaker profits. The market reacted swiftly, pushing the stock down about 4% in early trading and closing at $438.97 on Thursday, a $3.78 drop from the previous session.
Tesla reported quarterly revenue of roughly $28.1 billion, up 12% from a year earlier and ahead of Wall Street expectations. That growth reflects steady demand for its vehicles, supported by a rush of U.S. buyers eager to take advantage of expiring EV tax credits. But profit figures told a different story. Net income fell between 30% and 40% compared to the same quarter last year. Earnings per share landed at $0.50, short of the $0.55 analysts expected. Gross margin slid to around 18%, down from levels that once hovered above 25%.
The main pressure point is rising costs. Tesla has been pouring billions into AI development, robotics, and next-generation manufacturing. While these investments may pay off later, they are currently weighing on profits. Revenue from regulatory credits — once a key profit driver — dropped by more than 40%. Add higher tariffs and raw material costs, and expenses are rising faster than earnings.
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Competition Adds More Pressure
Part of the sales boost came from buyers locking in federal EV tax credits before expiration, creating a temporary demand spike. Analysts worry whether this momentum will last without incentives. Meanwhile, competition is intensifying. BYD Co., Ltd. and Volkswagen AG are expanding their EV offerings, often at lower prices. Tesla’s core vehicle lineup hasn’t seen major changes, and some investors believe the brand is losing its product edge.
CEO Elon Musk continues to champion the company’s long-term vision around robotaxis and autonomous driving. But those ambitions come with uncertainty. Heavy spending, ambitious timelines, and growing skepticism about execution have made some shareholders uneasy. Analysts at JPMorgan Chase & Co. also flagged “unprecedented brand damage,” pointing to shifting consumer sentiment and Musk’s polarizing leadership style.
This isn’t Tesla’s first rough patch. In early 2024, the company experienced its largest revenue decline since 2012, with net income decreasing by more than 50% year-over-year. It also faced investor pullbacks in 2022 and 2023 when credit revenues weakened and margins thinned. While its stock has rebounded from past dips, the EV market is now more crowded, and cost pressures are sharper than before.
The latest sell-off highlights growing concern that Tesla’s profitability is eroding even as its revenue rises. Investors are watching whether the company can rein in costs, refresh its product lineup, and make its ambitious technology bets pay off. Without those moves, this downturn may be more difficult to overcome. For more industry updates, visit our automotive news section.