Tesla Shares Fall After Earnings Despite Revenue Beat

Tesla shares declined in after-hours trading Wednesday after the electric vehicle manufacturer reported third-quarter earnings above Wall Street expectations, as questions about subscription revenue and a possible merger with SpaceX remained unresolved. The company's financial results showed stronger-than-expected adjusted earnings, but investors also scrutinized its Full Self-Driving (FSD) subscription figures and sought greater clarity on its strategic direction.

Tesla closed Wednesday at $386.47, gaining 3.41% during the regular session before dropping 3.32% to $373.65 after hours, according to Benzinga Pro. The company reported third-quarter revenue of $28.05 billion, flat from a year earlier but above analysts' consensus estimate of $27.88 billion.

Adjusted earnings reached 48 cents per share, exceeding the consensus forecast of 43 cents. Tesla attributed its revenue performance to weakness in its energy business, lower average vehicle selling prices, and a year-over-year decline in deliveries, while automotive revenue fell 3% to $20.56 billion.

The earnings call also left questions about a potential combination with SpaceX unanswered. Travis Axelrod, Tesla's head of investor relations, established the company's position at the beginning of the question-and-answer session with analysts.

"We will not be addressing any questions today on a potential merger with SpaceX," said Travis Axelrod, Tesla's head of investor relations.

The lack of discussion left investors without additional information about the possibility of a transaction involving the two companies associated with Elon Musk. Meanwhile, analysts continued to assess Tesla's artificial intelligence ambitions and the commercial potential of its driver-assistance technology.

Investor Gary Black suggested that profit-taking may have contributed to the after-hours decline following a roughly 7% increase in Tesla shares over the preceding three trading sessions. He also challenged the interpretation of the company's reported FSD attachment rate in North America, which exceeded 75% of deliveries.

Black questioned whether that figure included customers receiving a free first month of FSD service. He criticized Chief Financial Officer Vaibhav Taneja's response when an RBC analyst asked whether the paid subscription attachment rate was closer to 30% to 40%.

"CFO Taneja didn’t help matters on the call," said Gary Black, an investor who commented on Tesla's earnings.

Black's criticism focused on the lack of clarity surrounding the subscription metric and whether the headline figure accurately reflected customers paying for the service. He elaborated on his concerns about the executive's response in a separate comment.

"Taneja didn’t really answer what seemed like an easy question," said Gary Black, an investor who discussed the earnings call on X.

Other market observers emphasized the potential for FSD to become a significant source of recurring revenue. Dan Ives, a partner and senior managing director at Wedbush Securities' competitor Yorkville Ives, highlighted the reported subscription growth and Tesla's expanding AI operations.

Ives said active FSD subscriptions reached 1.74 million, up 67% year over year, while the attachment rate exceeded 75% of North American deliveries. He also pointed to the start of Optimus production and described Tesla's AI strategy as aligned with the potential strategic fit of a SpaceX merger.

Shay Boloor, chief market strategist at Futurum Equities, said Tesla added a record 260,000 FSD subscribers in the third quarter. He estimated that these new subscribers alone could generate approximately $310 million in annualized revenue, potentially lifting the subscription business's implied annual revenue run rate above $2 billion.

Gene Munster, managing partner at Deepwater Asset Management, identified FSD as an increasingly relevant consideration for vehicle buyers, although he said it was not yet a decisive factor for most consumers. He expects the technology to become more influential in purchasing decisions over the next several years.

Munster also assessed Tesla's production ambitions, noting that the company aims to produce 5 million vehicles annually starting in 2030, compared with an estimated 2 million in 2026. He described that target as implying 25% compound annual growth through 2030.

Tesla's latest results therefore presented contrasting signals for investors: quarterly earnings exceeded expectations, FSD subscriptions continued to expand, and the company pursued broader AI and robotics initiatives, while questions about paid subscription penetration and a possible SpaceX merger remained unresolved.