Tesla Q3 2026: AI Compute Expansion Continues Despite Lower Capex Guidance

Tesla released its third-quarter 2026 financial results on October 21, reporting revenue of $28.05 billion, down 0.2% year over year. Adjusted earnings per share came in at $0.48, above the expected $0.44. Operating profit fell 56% to $718 million, while gross margin improved to 19.6% from 18% a year earlier.

Automotive revenue declined 3% year over year to $20.56 billion, and energy revenue dropped 16% to $2.88 billion. Service and other revenue rose 33% to $4.61 billion. Tesla attributed the weaker automotive results to lower average selling prices and battery supply constraints that limited vehicle production to meet backlog orders.

Capital expenditures in the quarter totaled $4.73 billion, well below the projected $7.95 billion. Free cash flow was $1.53 billion, down 62% year over year. Tesla also lowered its full-year capex guidance to $20 billion from $25 billion, with the CFO saying the company plans to rely mainly on operating cash flow and efficient capital deployment.

Tesla said the funds will be used for the Optimus production line, AI computing, the Cybercab line, and the Terafab chip factory being built with SpaceX. The Optimus robot has begun production at the Fremont factory, and Tesla stated its manufacturing process is now suitable for commercial products. The company also reiterated plans to reach 400 MW of AI training compute capacity by the end of 2026. FSD subscriptions reached 1.74 million active users, and Tesla aims to roll out FSD to some customer vehicles around the second quarter of 2027.