Tesla's Q3 Revenue Report: Below Expectations

Tesla (TSLA) failed to meet investors' expectations with its third-quarter earnings report released after Wednesday's closing. The company’s operating profit fell by 40% year-over-year to $1.624 billion. This situation is attributed to the transition period following the Electric Vehicle (EV) tax credits and more developments in Robotaxi technology were also shared during the session.

The company’s CEO Elon Musk provided investors with some updates regarding Robotaxis, stating, "We have launched a ride-hailing service in the Bay Area using Robotaxi technology." Musk mentioned that they expect to offer driverless services in certain areas of Austin by the end of the year and plan to conduct Robotaxi tests in a total of eight to ten metro areas, including Nevada, Florida, and Arizona.

Tesla shares lost more than 5% in early trading on Thursday. Analyst Jed Dorsheimer noted that Tesla is aware of its media sensitivity and potential regulatory reactions, adding "The company is moving cautiously while bringing its groundbreaking technology to life." Piper Sandler analyst Alexander Potter emphasized that real-world artificial intelligence is a significant advantage for Tesla.

Tesla had launched its first Robotaxi test in Austin during the summer and expanded the service area a few weeks later; however, there is still a safety driver in every Robotaxi. The company is conducting ride-hailing service trials in the San Francisco Bay Area, but vehicles are still operated by humans. Tesla's these applications have raised concerns among local authorities in California.

For the third quarter, Tesla reported $28.01 billion in revenue. According to Bloomberg data, this is higher than the expected $26.27 billion and represents a 12% increase compared to last year's $25.18 billion. However, it reported an adjusted earnings per share (EPS) of $0.50, below the estimated $0.54. EBITDA was reported as $4.23 billion.

Tesla’s profit in the third quarter was adversely affected by the decline in regulatory emission credit revenue. The company noted that customs tariffs were $400 million in the third quarter, while the tariff loss in the second quarter was recorded as $300 million. Tesla recorded the highest delivery and free cash flow numbers, but this did not yield as positive a result as expected.

Earlier this month, Tesla introduced a new "standard" version of the Model Y and Model 3 sedans to reduce costs. Both models are rear-wheel drive, equipped with smaller batteries and less powerful motors, and lack some comfort features. Their prices are set at $39,990 and $36,990, respectively. Additionally, Elon Musk expressed his desire to seek shareholder support for a new approval package at the end of the conference; however, this matter has become the subject of a lawsuit in the state of Delaware.

Currently, Tesla's shareholders are facing claims that Musk's compensation has not been adequately assessed with sufficient information. The Delaware Supreme Court is currently reviewing Tesla's appeal on this matter.