Tesla reported third-quarter earnings that exceeded analyst expectations, despite a slight decline in automotive revenue. The company posted adjusted earnings per share of 48 cents, beating the 43-cent estimate, and generated $28.05 billion in revenue, slightly surpassing predictions. However, shares dropped over 3% in after-hours trading, contributing to the stock’s 14% decline so far this year amid broader tech sector underperformance.

Automotive revenue fell 3% year-over-year to $20.56 billion, with Tesla citing lower average selling prices and battery supply challenges that limited production and fulfillment of orders. Energy segment revenue decreased 16% to $2.88 billion, but this was offset by a 33% rise in services and other revenue, which reached $4.61 billion. Tesla’s net income attributable to common shareholders dropped 29% to $787 million as spending surged on projects like the Optimus humanoid robot and AI development.

Tesla highlighted growth in its Full Self-Driving (FSD) system, with active subscriptions increasing 67% to 1.74 million users. The company aims to introduce an unsupervised FSD version to select customers by mid-2027. CEO Elon Musk also discussed expansion of the Cybercab robotaxi fleet, which currently operates without drivers in Texas and is expected to contribute meaningfully to revenue next year as it rolls out to more cities.

The report coincided with Musk confirming special committees have been formed by Tesla and SpaceX boards to evaluate a potential merger, an idea Musk initially proposed during SpaceX’s earnings call. Tesla is also investing heavily in a semiconductor factory with SpaceX and Intel in Texas, signaling further integration of Musk’s ventures. Musk indicated progress on the AI and robotics front but expects technology and design hurdles to be resolved by the end of 2027.