Tesla set a delivery record in the quarter - 480,126 vehicles - and grew revenue 26 percent to $28.24 billion, past what analysts expected [1]. The trouble is everything below the top line.
Adjusted earnings came in at 33 cents a share against about 51 cents expected, down 18 percent from a year earlier; operating income fell 57 percent to $398 million; the operating margin was 1.4 percent; free cash flow was negative $1.09 billion [1]. A record number of cars, sold into the thinnest profit Tesla has posted in years.
One line carries much of the explanation. Regulatory-credit revenue - the near-pure profit Tesla makes selling emissions credits to other automakers - fell to $146 million from $439 million a year earlier, a 67 percent drop [1]. That is not a market swing; it is the result of a law. The Republican reconciliation package ended the $7,500 federal EV tax credit as of September 30, 2025, and the collapse of EV-purchase incentives took much of the value of Tesla's credits with it [1].
The forecast came from the top. Elon Musk, who spent 2025 as the administration's most prominent business ally, told the earnings call: 'We probably could have a few rough quarters' [1].
A company can back a policy and absorb its cost in the same year, and Tesla's income statement is what that looks like: roughly $293 million of pure-margin credit revenue gone in twelve months, a 1.4 percent operating margin, and the chief executive who cheered the governing majority now bracing his shareholders for the bill it left him [1].
