Tesla reported positive free cash flow in Q3 after a negative second quarter, but lower-than-forecast capital spending drove the result. Operating income fell, and the company still plans billions in spending.
Tesla generated $1.53 billion in free cash flow in its third quarter, one quarter after burning through more than $1 billion. The figure is positive, but the result was largely due to lower capital expenditure than forecast.
Lower capex flips the cash flow
Operating cash flow reached $6.26 billion in the quarter, essentially matching the $6.24 billion from a year earlier. The second quarter produced $4.7 billion.
Capital expenditures totaled $4.73 billion, down from $5.79 billion in Q2. That helped turn a $1.09 billion deficit into a $1.53 billion surplus in free cash flow.
Analysts had expected more spending. According to Tesla's own pre-earnings average estimate, they anticipated about $7.77 billion in capex and negative free cash flow of $4.51 billion. Free cash flow still fell 62% from a year earlier.
Earnings stay under pressure
However, spending less does not necessarily mean the business became more profitable. Tesla's operating income fell 56% year over year to $718 million, while net income attributable to common shareholders declined 43% to $787 million.
Billions in spending still ahead
Chief Financial Officer Vaibhav Taneja lowered the full-year capex outlook to about $20 billion on the earnings call, from more than $25 billion announced earlier this year. Even so, capex over the first nine months of 2026 totaled $13.01 billion, more than double the $6.13 billion spent in the same period last year.
Reaching $20 billion would require another $7 billion in the fourth quarter. Tesla also secured $30 billion in additional borrowing capacity in the third quarter, and management says it does not expect to draw on those funds during 2026.
Source: Motley Fool
Trading involves risk.
Risk Disclaimer
