Tesla Q3 Earnings Preview: A record quarter expected but risks to the outlook persist

Tesla will report its Q3 results on Wednesday, 22nd of October, with hopes high for a strong quarter but with doubts persisting about the growth outlook.

Strong Q3 results expected, but for one-off reasons

Consensus estimates pointing to earnings per share of $0.53 on revenue of $US26 billion dollars. The results are expected to reflect a strong rebound in activity in the quarter, following a subdued first half of the year. Deliveries reached a record 497,000 vehicles, driven primarily by a rush of US consumers seeking to benefit from the expiring $US7500 federal EV tax credit. The automaker’s plants reportedly operated at full capacity through the quarter, helping lift production efficiency and supporting a rebound in profitability, with gross margins expected to recover modestly to around 18% and net income near $US1.9 billion. 

However, the outlook for subsequent quarters is less certain. The expiry of US subsidies, coupled with a maturing EV market, may see demand soften, particularly as competition from low-cost Chinese manufacturers and legacy automakers continues to grow. Tesla’s near-term challenge will be maintaining sales momentum in a post-incentive environment while managing narrowing profit margins squeezed by rising costs and pricing strategies intended to defend market share.

Investor sentiment improves but the growth story is under scrutiny

Tesla’s share price has nearly doubled in the past 12 months, buoyed by a broad recovery in risk appetite and improving sentiment toward the company. A key driver has been a perception that CEO Elon Musk has stepped back from the political spotlight, allowing the focus to shift back to Tesla’s operational performance and product roadmap. 

Still, the rally masks ongoing structural challenges. The company faces intensifying price competition, particularly in China and Europe, where rivals such as BYD, NIO, and Volkswagen are aggressively expanding. Margin pressure remains a persistent concern, with rising input costs and continued discounting needed to defend market share. As a result, investors will be watching management’s forward guidance closely for clues on production plans and demand trends into 2026. 

The market will also look for updates on longer-term growth drivers — including the commercial rollout of Robotaxis, the scaling up of battery manufacturing capacity, and advancements in autonomous and AI technologies — all of which remain central to Tesla’s valuation narrative and long-term credibility as a technology leader.

Valuation leaves little room for disappointment as technicals point to exhaustion

Tesla’s stock last traded around $US439, well above the 12-month consensus target of $US355, implying limited upside if results fall short. Of the 70 analysts covering the stock, 46% rate it a buy, with 27% hold and 27% sell. The forward price-to-earnings multiple of 215 times continues to reflect lofty growth expectations and minimal tolerance for earnings misses, leaving little margin for error as competition intensifies and policy tailwinds fade.

After a resounding recovery from the April lows, Tesla shares are signalling signs of exhaustion. The weekly chart conveys slowing upside momentum and a failure to make a new high. Resistance looms at the previous high of $US488, with an upward sloping trendline one level of potential support along with previous resistance at $US365.

(Source: Trading View)
(Past performance is not a reliable indicator of future results)