Tesla Inc. – Margins recover, but OPEX absorbs gains October 23, 2026 5

PSR Recommendation: SELL Status: Maintained
Target Price: 230.00
  • 3Q26 results were above our expectations with 9M26 revenue/adj. PATMI at 82%/84% of our FY26e forecasts. Adj. PATMI (excl. SBC and fair value changes on bitcoin and SpaceX shares) fell 4% YoY to US$1.7bn, as a 39% rise in OPEX and a 73% fall in regulatory credits offset a 9% rise in gross profit. Revenue was flat YoY at US$28.0bn.
  • Deliveries fell 2% YoY to 487k against a 3Q25 base lifted by buying ahead of the US EV tax credit expiry. Deliveries exceeded production by 22k units, leaving inventory at 11 days of supply (3Q25: 10 days). Active FSD subscriptions rose 67% YoY to 1.74mn. FY26e capex guidance was cut to ~US$20bn (prev. >US$25bn), and FCF fell 62% YoY to US$1.5bn as capex more than doubled to US$4.7bn.
  • We maintain our SELL recommendation. We lift our target price to US$230 (prev. US$220) as we raise FY26e earnings by 8% from higher auto revenue estimates. Our WACC/growth rate assumptions of 9%/5% remain unchanged. We remain cautious on TSLA. A 39% YoY rise in OPEX cut operating margin to 2.6% (3Q25: 5.8%). OPEX will keep rising until Optimus, Cybercab and Semi sell in volume, as TSLA pays for SI compute, chip design, and new production lines before they earn revenue. We view a merger with SPCX as positive move, as they would own part of a faster growing business that made ~4x TSLA’s operating profit in 3Q26. The main drawback is that TSLA’s US$45bn of cash would go towards SPCX’s heavy capex.

 

 

 

 

 

 

 

 

 

 

The Positives
+ Gross margin recovers. Gross margin rose 1.6ppt YoY to 19.6%. Auto gross margin excl.
credits rose to 18.1% (3Q25: 15.4%) on a higher APAC delivery mix. Model Y set delivery
records in several markets. Energy gross margin rose to 33.1% (3Q25: 31.4%) on tariff refunds
received and a vendor reimbursement of cell warranty costs. Services and Other gross profit
reached a record US$734mn at a 15.9% margin. TSLA exited the quarter with its largest order
backlog in four years. Megapacks are almost sold out for 2027.
+ FSD adoption accelerates. Active FSD subscriptions rose 67% YoY to 1.74mn. Over 75% of
North America buyers signed up for paid FSD at delivery. The CFO agreed FSD annual recurring
revenue is approaching US$1bn. FSD is approved in nine European countries. Management
expects approval across the EU by 1Q27. Cybercab rides started in Austin on 3 Sep. Dallas
follows next month. Cumulative unsupervised miles rose eightfold in the quarter. Semi
started volume production in Nevada. Optimus started early production at Fremont.

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About the author

Profile photo of Glenn Thum

Glenn Thum
Research Analyst
PSR

Glenn covers the Banking and Finance sector. He has had 3 years of experience as a Credit Analyst in a Bank, where he prepared credit proposals by conducting consistent critical analysis on the business, market, country and financial information. Glenn graduated with a Bachelor of Business Management from the University of Queensland with a double major in International Business and Human Resources.

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