On October 22, Tesla released its third-quarter financial report, showing total quarterly revenue of $28.05 billion, a year-over-year change of -0.17%; gross profit of $5.494 billion, up 8.71% year-over-year; and net profit attributable to shareholders of $787 million, down 42.68% year-over-year.
The slight decline in revenue alongside steady gross profit growth, combined with a sharp drop in net profit, might on the surface suggest rising operating costs and declining profitability at Tesla. In reality, however, this is linked to the company's heavy investment in the AI sector.
Net Profit Decline Tied to Surge in R&D Spending
Tesla's net profit decline is partly related to a sharp increase in research and development expenses. In the third quarter of this year, Tesla's R&D spending reached $2.761 billion, compared to only $1.63 billion in the same period last year, a surge of 40.96%. Tesla's automotive technology is already highly mature, and the increased R&D investment is mainly directed toward superintelligence, the Optimus humanoid robot, and the Cybercab autonomous robotaxi.
The rise in R&D spending is also reflected in increased stock-based compensation costs. From this perspective, Tesla's net profit decline is no longer a sign of lost competitiveness, but rather a proactive decision to "spend" in order to solidify its competitive position in high-growth industries.
Tesla Shares Jump After Earnings Release
Following the release of its third-quarter earnings report, Tesla's stock surged overnight, closing up 3.41%, with an intraday high of $388.84, marking a new high since July 17. Judging from the stock price movement, market capital appears to view the third-quarter earnings report as positive news for Tesla's business outlook, which aligns with our analysis that the net profit decline is intended to strengthen future product competitiveness.
In terms of specific business segments, Tesla's Gigafactory in Berlin has reached a record annual production level of 375,000 vehicles, while the Gigafactories in Shanghai and California have annual capacities of 950,000 and 550,000 vehicles, respectively. Additionally, Tesla's heavy truck has entered mass production. In the third quarter, 2,100 new Supercharger stations were added, expanding the network by 14%. The Optimus humanoid robot has already been launched on a high-volume production line in Fremont, meaning the laboratory product is now entering mass production and is expected to become a new profit growth driver for Tesla.
In the areas of power, batteries, and AI computing, Tesla's Megapacks have enormous market potential, especially amid grid constraints and power supply shortages, where energy storage demand and AI infrastructure needs are expected to drive Megapacks to rapidly achieve high revenue. Tesla expects to reach 400 megawatts of training capacity by the end of the year, and this power and computing capacity can support Tesla's FSD and robot development.
Overall, Tesla has a rich product lineup with clear division of labor and collaboration among its products. Automotive products represent the most stable profit growth driver, while AI and the Optimus robot serve as high-barrier bets on the future. Tesla's quarter-end passenger vehicle order backlog hit a four-year high, meaning automotive products remain in a state of supply shortage. With other product lines not excessively diverting profits, market confidence is expected to continue strengthening and drive the stock price higher.
Risk Disclosure and Disclaimer
Markets carry risk, and investment requires caution. The above content represents the analyst's personal views only and does not constitute any trading recommendation. Please do not treat this report as the sole reference for decision-making. The analyst's views may change over time, and updates will not be separately announced.
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