Is Tesla Hiding Cracks in Its Core Business Behind Elon Musk’s Big Bets?

Core Insights - Tesla's CEO Elon Musk emphasized a critical transformation point for the company, aiming to evolve from an automotive firm to an AI-powered technology and energy powerhouse by 2025 [1] - Despite record vehicle sales and a growing energy-storage business, the company's current financial performance shows mixed results, with significant declines in profitability and margins [2][4] Financial Performance - Tesla reported third-quarter revenue of approximately $28.1 billion, reflecting a year-on-year increase of about 12% [4] - Vehicle deliveries increased by 7.4% year-over-year, totaling 497,009 vehicles [4] - Operating income fell by 40% to around $1.6 billion, leading to an operating margin of only 5.8% [4] - Adjusted earnings per share decreased by 31% to $0.50, missing consensus estimates [4] - Gross margin dropped to 18%, down from 19.8% the previous year, attributed to price cuts to maintain demand amid rising competition [4] Future Outlook - Musk highlighted advancements in AI, including the "Grok 5" model and plans for cars that "feel like living creatures" under new AI systems [5] - Tesla aims to begin production of its humanoid robot, Optimus, next year, with a target of producing up to one million units annually once scaling begins [5] - The company anticipates a significant increase in capital expenditures in 2026 to support AI chip design, Optimus production, and full self-driving infrastructure [5] - Tesla ended the quarter with a cash balance of $41.6 billion and free cash flow of $3.9 billion [5]