Tesla beats Q3 earnings estimates as AI spending weighs on profits

Tesla Inc. beat third-quarter profit estimates on Wednesday as margins recovered from a weak second quarter, though rising spending on artificial intelligence and robotics more than halved its operating income. The company reported non-GAAP earnings of $0.48 a share, above the roughly $0.45 analysts expected but down from $0.50 a year earlier. Revenue was $28.05 billion, flat year over year and in line with consensus. In the second quarter, Tesla had missed estimates with earnings of $0.33 a share. Total gross margin rose to 19.6% from 18.0% a year earlier and 16.8% in the second quarter. Automotive gross margin excluding regulatory credits was 18.1%. Revenue from regulatory credits, once a reliable source of profit, fell 73% to $113 million. Operating income dropped 56% to $718 million, a 2.6% operating margin. Operating expenses rose 39% to $4.78 billion, driven by research and development on AI and the Optimus humanoid robot. GAAP net income fell 43% to $787 million, or $0.22 a share. That figure included a $288 million unrealized gain on Tesla’s bitcoin holdings and a $142 million unrealized loss on its stake in SpaceX. Free cash flow was $1.53 billion, down from $3.99 billion ...