Tesla Reports 43 Percent Profit Drop as Optimus Production Begins

Tesla reported a 43 percent year-over-year decline in third-quarter net income to $787 million as the electric vehicle manufacturer expanded investments in artificial intelligence, autonomous driving and humanoid robots. The company disclosed the results on October 21, 2026, alongside confirmation that production of its Optimus robots had begun at its Fremont, California, factory, as CEO Elon Musk also explored a potential merger with SpaceX.

According to Tesla's third-quarter financial results, revenue reached $28.04 billion, compared with $28.09 billion in the same period of 2025. Net income fell from approximately $1.37 billion a year earlier, while revenue remained broadly unchanged as spending on emerging technologies increased.

The results fell short of Wall Street expectations compiled by Tesla, which projected net income of $815 million and revenue of $28.3 billion. The earnings decline marked the company's second consecutive quarterly drop in profit, according to The New York Times.

Tesla said in its shareholder letter that its Fremont factory had started manufacturing Optimus humanoid robots in a facility previously used to produce electric vehicles.

"The bots coming off this line are the first production-quality bots that we have manufactured," Tesla wrote in its third-quarter letter to shareholders.

The company said its existing manufacturing process was suitable for a commercial product, although further adjustments to the robot's hardware and production methods would continue. The initiative represents another expansion of Tesla's business beyond its core vehicle operations.

On the earnings call, Musk characterized the manufacturing effort as an early stage of production and cautioned that output would increase gradually. He also outlined an ambitious manufacturing target for the coming years.

"While we will continue to iterate on the hardware and manufacturing process, we have proven that the current manufacturing process for Optimus is suitable for a commercial product."

Musk said Tesla could eventually manufacture 20,000 Optimus robots per week by the end of 2027. However, he acknowledged that the production ramp-up would be slow and potentially uneven because the product involves new technology.

Addressing remaining development challenges, Musk said the robot must meet reliability and durability requirements before it can be deployed for broader use.

"There's still some things we need to tweak about the design, because you need to deliver a robot that is that is safe and reliable and has long duration, so it can't like, wear out after a month," Musk said.

He also pointed to continuing work on the artificial intelligence software needed to enable the robot to perform a wide range of tasks. Tesla has yet to establish that Optimus can reliably handle unrestricted activities in practical settings.

"And there's still quite a lot of work to do with regard to the AI and the robot for it to be truly useful for open-ended tasks."

Vehicle sales remained Tesla's largest revenue source. The automotive business generated approximately $20 billion, with revenue flat year over year, while the company delivered 486,532 vehicles during the quarter, around 6,000 more than in the previous quarter but fewer than in the third quarter of 2025.

Revenue from solar energy and storage declined 16 percent year over year to $2.8 billion. Tesla attributed the decrease to customer refunds associated with tariffs. Meanwhile, its services business, which includes subscriptions to its Full Self-Driving driver-assistance software, grew 33 percent to $4.6 billion and generated a record $734 million in gross profit.

Lower sales of regulatory credits also weighed on profitability, according to the company's earnings report. Growth in services revenue did not offset the broader pressure on earnings as Tesla increased spending on AI development and Optimus.

Tesla executives also discussed plans for its Full Self-Driving software, which currently requires drivers to remain attentive and ready to take control. The company has continued to develop an unsupervised version intended to support more advanced autonomous driving capabilities.

Ashok Elluswamy, Tesla's vice president of AI software, outlined a potential next step involving privately owned vehicles equipped with the supervised software.

"We suspect somewhere around Q2 next year is when we can turn on some of the first customer vehicles to be part of the robotaxi fleet," Elluswamy said.

The proposed rollout would allow eligible customer vehicles to receive a software update enabling unsupervised driving. Musk had said in April that the unsupervised version would probably be released in the fourth quarter of 2026, but the timeline was subsequently delayed again.

The earnings announcement also followed Musk's disclosure that Tesla and SpaceX were exploring a possible merger. The combination could bring electric vehicles, humanoid robots, rockets, satellite internet and artificial intelligence under a single corporate structure. Musk declined to discuss the proposal during Tesla's October 21 earnings call.