Tesla’s record-breaking sales this quarter have given the company some relief after a rough start to 2025. However, CEO Elon Musk remains intent on developing a “robot army” and finally delivering on his long-standing, yet-to-be-fulfilled commitment to self-driving vehicles — goals he must achieve to fully access the $1 trillion compensation package Tesla is proposing for him.
The contrast between Tesla’s current car-focused operations and Musk’s vision of an AI-driven future has never been more pronounced.
In the third quarter of 2025, Tesla delivered more vehicles than ever before, largely due to a surge of U.S. buyers eager to benefit from the soon-to-expire federal EV tax incentive. Despite this milestone, the quarter did not translate into higher profits. Tesla’s earnings for the third quarter were actually 37% lower than the same period last year.
Tesla shipped 497,099 vehicles in Q3, generating $21.2 billion in automotive revenue — the highest in over a year. Yet, the company only reported $1.4 billion in profit, a modest $200 million increase from the previous quarter, according to a shareholder update released Wednesday. This record-setting quarter followed a dismal start to the year, with sales plummeting in part due to Musk’s ties to the Trump administration.
The shareholder letter pointed to a sharp rise in operating costs — up 50% from last year’s third quarter — as a major factor. These higher expenses were attributed to investments in AI and other research and development efforts, as well as nearly $240 million in “restructuring” charges. Tesla did not specify the nature of these charges, but they may be linked to the recent shutdown of the company’s six-year-old Dojo supercomputer initiative.
Tariffs were also cited as a factor weighing on profits this quarter, meaning Musk spent about $300 million supporting the election of a president whose policies have negatively impacted Tesla’s business. On a Wednesday conference call, CFO Vaibhav Taneja said tariffs cost the company roughly $400 million.
“Tesla is at a pivotal turning point as we integrate AI into real-world applications,” Musk stated during the call. He added that the company is just starting to massively scale up Full Self-Driving and Robotaxi, aiming to fundamentally transform transportation.
All of this increases the stakes for Tesla’s final quarter of the year.
Tesla will need to set another sales record — and then some — just to match its delivery numbers from 2024 or 2023. The introduction of more affordable, basic versions of the Model 3 and Model Y EVs could provide a boost. Still, even in the best-case scenario, Tesla is far from achieving the 50% annual growth it once pledged to shareholders and investors.
Over the past few years, Musk has urged shareholders, investors, and employees to look beyond Tesla’s core business of manufacturing and selling cars. He has staked the company’s future on building a vast fleet of autonomous vehicles he believes could rival Uber, and he predicts the humanoid robot Optimus will become the world’s top-selling product.
Wednesday’s shareholder letter provided little fresh detail about these initiatives. Musk mentioned on the call that Tesla might begin producing the third generation of Optimus in early 2026. He had previously promised thousands of these robots would be built by the end of this year, but as The Information has reported, Tesla has encountered setbacks in early Optimus production.
“Bringing Optimus to market is extremely challenging, to be clear. It’s far from easy,” Musk remarked.
Nevertheless, Musk continued to make sweeping, vague claims about Optimus’s potential to reshape society. “It’s possible to create a world without poverty, where everyone can access top-tier healthcare,” he said. “Optimus will be an extraordinary surgeon.”
Tesla’s growing emphasis on AI, robotics, and autonomous vehicles — including the start of production for the two-seat “Cybercab” — will also drive up costs next year. Taneja noted that capital expenditures are expected to rise “significantly” in 2026 due to these projects. He also mentioned that Tesla has had to boost employee-related spending to remain competitive in the ongoing battle for AI talent.
These third-quarter results come as Tesla is proposing to grant Musk $1 trillion in company shares. The plan will be put to a vote at Tesla’s annual shareholder meeting in the coming weeks. Both the company and Musk are campaigning vigorously. Although advisory firms like ISS and Glass Lewis have advised against the compensation plan, it is likely to pass given the strong backing from shareholders in previous votes.
That hasn’t stopped Musk from warning he may leave Tesla if the package is rejected.
During Wednesday’s call, he repeated that he values the voting power the compensation package would give him more than the financial reward.
“I’m not comfortable building a robot army here only to be pushed out by some ridiculous recommendations from ISS and Glass Lewis, who have absolutely no idea. Honestly, those people are corporate terrorists,” Musk said.
This article has been revised to include updates from Tesla’s third-quarter conference call.
