Tesla’s record sales quarter gave the company a reprieve after a terrible start to 2025. But CEO Elon Musk is focused on building an “army of robots” to deliver on the long-unmet promise of self-driving cars. This is a task he will need to accomplish if he is to unlock the full $1 trillion compensation package that Tesla is giving him.
The tension between Tesla’s current car-driven business and the AI-centric business Mr. Musk is aiming for has never been clearer.
Tesla delivered a record number of vehicles in the third quarter of 2025. This was largely due to a rush of U.S. customers taking advantage of the expiring federal EV tax credit. However, this record quarter did not translate into increased revenue. In fact, Tesla’s third-quarter profits were still down 37% compared to the same period last year.
Tesla shipped 497,099 cars in the third quarter, generating $21.2 billion in auto revenue. This is the company’s highest revenue in more than a year. But Tesla made only $1.4 billion in profit, just $200 million more than the second quarter of this year, according to a letter to shareholders released Wednesday. The record quarter comes after a disastrous start to the year for Tesla, which saw sales plummet due in part to Musk’s involvement in the Trump administration.
The company said in the letter that a significant increase in operating expenses (up 50% compared to the third quarter of last year) was one of the reasons. This increase in operating expenses was driven by spending on AI and other research and development projects, as well as approximately $240 million in “restructuring” charges. Tesla has not explained the purpose of these restructuring charges, but they may be related to the company’s recent decision to end its six-year-old Dojo supercomputer project.
Tesla cited the tariffs as a factor that further weighed on profits in the quarter, with Mr. Musk spending about $300 million to support his presidential bid, which hurt the company’s results. Tesla Chief Financial Officer Vaibhav Taneja said in a conference call Wednesday that the impact of the tariffs would be about $400 million.
“We are at a critical inflection point for Tesla and our future strategy as we bring AI into the real world,” Musk said on a conference call. Tesla is now “fundamentally changing the nature of transportation with the massive expansion of fully autonomous driving and robotaxis,” he said.
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All of this will put even more pressure on the company in the final quarter of the year.
Tesla already needs a record quarter (and several more) if it wants to simply match its 2024 or 2023 car shipments. The company could get some help from new, slightly cheaper, feature-simplified EVs in the Model 3 and Model Y. But even in that best-case scenario, Tesla is far from the 50% year-over-year growth trajectory it once promised investors and shareholders.
But Mr. Musk has spent the last few years trying to get shareholders, investors, employees and everyone else to look beyond the company’s core business of making and selling cars. He is betting Tesla’s future on its ability to build a vast network of self-driving cars to compete with Uber. And he thinks the humanoid robot Optimus will be the best-selling product of all time.
Tesla provided little new information about these programs in Wednesday’s letter. Musk said on a conference call that Tesla could begin manufacturing the third version of Optimus in the first quarter of 2026. Musk previously promised to build thousands of robots by the end of this year, but as The Information reported, Tesla ran into problems with initial production of Optimus.
“To be clear, bringing Optimus to market is an incredibly difficult task. It’s not a walk in the park,” Musk said.
But Musk continued to make Tesla’s bland and unspecific claims about how much Optimus would change the world. “We can actually create a world without poverty, a world where everyone has access to the best health care,” he says. “Optimus would make a great surgeon.”
Tesla’s increased focus on AI, robotics and self-driving cars (including the start of production of its two-seater CyberCab) will also further increase Tesla’s costs next year. Taneja said capital spending will increase “significantly” in 2026 thanks to these projects. He also said Tesla needs to increase employee-related spending to remain competitive in the ongoing AI talent war.
Tesla’s third-quarter results were released on the back of the company’s proposal to sell $1 trillion worth of stock to Musk. The plan will be voted on at Tesla’s annual shareholder meeting in the coming weeks. The company and Mr. Musk are actively campaigning. Although advisory groups like ISS and Glass Lewis have recommended against the pay package, the bill is most likely to pass given the overwhelming support from shareholders for efforts to date.
Still, Musk threatened to pull out of Tesla if the package wasn’t approved.
On Wednesday’s conference call, he reiterated his claim that he values the voting control his compensation package provides more than the money.
“It’s disgusting to be able to build an army of robots here and then get kicked out because of some stupid recommendation from the ISS or Glass Lewis that they have no clue about. So they’re corporate terrorists,” Musk said.
This article has been updated with new information from Tesla’s third quarter conference call.
