'The worst is behind us': why will Tesla's weak results 'please the bears'?

Tesla shares fell 3% in US morning trading after the company reported mixed results for the third quarter. The electric car maker's quarterly profit fell by more than a quarter due to a loss of revenue from emissions trading, rising costs due to U.S. duties and significant costs for the company's transition to robotics and artificial intelligence. At the same time, the investment will lay the groundwork for "the most important chapter in the company's growth story - the autonomous and robotics era," some analysts said."

The cost of Tesla securities after the opening of morning trading in the U.S. on October 23 fell by about 3%. The company presented mixed results for the third quarter a day earlier after the stock exchanges closed: earnings of $0.5 per share were below analysts' expectations, and adjusted net income decreased by 29%. The company attributed these results to lower electric vehicle prices and a 50% increase in operating expenses, partly due to the development of artificial intelligence and other projects. At the same time, revenue grew for the first time in 2025 - by 12% immediately - and significantly beat the consensus forecast. This marked the first quarter in 2025 with an increase in revenue after two consecutive quarters of decline, Investopedia notes.

Analysts expected strong results after Tesla reported record electric vehicle shipments for the past quarter in early October thanks to the expiration of tax credits for buying electric cars in the U.S.: Americans were rushing to take advantage of the deduction. But investors saw a mixed picture in Tesla's report: stable cash flow and a strong energy division - amid slowing auto production and political risks surrounding Musk, MarketWatch noted .

What's Wall Street saying about this?

The weak earnings results didn't come as a shock to the market, said Ryan Lee of Direxion, quoted by MarketWatch, but there are details in the report that will clearly please the bears. According to Lee, the increase in deliveries is likely due to buyers rushing to purchase electric vehicles before the tax credits expire. "This one-time spike could dampen sales both next quarter and next year," the analyst said.

Jake Beahan, head of capital markets at Direxion, partly agrees. The stock's decline likely reflects the fact that "traders didn't find new catalysts in the sluggish report that could have pushed the securities to fresh highs," the analyst noted in a MarketWatch statement.

That said, Beehan believes this quarter could be a turning point: the electric vehicle business is facing challenges, but the energy business is showing positive momentum.

Tesla's report showed that the company "remains self-funded," noted Jefferies analyst Philippe Ushua. "A very strong free cash flow figure of nearly $4 billion shows that while auto manufacturing is no longer the main driver of Tesla's valuation, it is generating enough cash to fund future developments," Ushua wrote in a MarketWatch note.

Gene Munster, managing partner at Deepwater Asset Management, highlighted the strength of Tesla's balance sheet, emphasizing that the company's cash and liquidity grew by $4 billion during the quarter and now stands at $41 billion, Benzinga writes . According to Munster, this is enough to fund the company's "product roadmap."

However, analyst Garrett Nelson of CFRA cautioned investors that expectations for Tesla are still too high. "With electric vehicles no longer subsidized in the U.S., questions remain about the near-term drivers of earnings growth," he added. The company's adjusted earnings for the first three quarters of the year fell 31% from the same period in 2024, according to analyst estimates.

During a conference call, Tesla CEO Elon Musk said that the next generation of the Optimus robot will be ready for demonstration in the first quarter. "Optimus will be so realistic that you'll want to touch it to make sure it's really a robot," the billionaire noted.

Musk also said that Tesla has launched a ride service in the San Francisco Bay Area using robotaxi technology.

According to Wedbush analyst Dan Ives, "the worst is behind us" for Tesla, and new technologies - robots and unmanned cars - are opening up new prospects.

"We remain confident that the most important chapter in Tesla's growth story begins now - with the arrival of the age of artificial intelligence. It all starts with autonomous technology and then robotics. We believe the autonomous driving component alone could add $1 trillion to Tesla's capitalization in the coming years," Wedbush analyst Dan Ives said in a note(quoted by Yahoo Finance).

This article was AI-translated and verified by a human editor