Texas-based Tesla reported profits of US$787 million, down 42.7 percent from the year-ago period.
Besides marginally lower car sales, Tesla saw a drop in revenues from regulatory credits and energy and storage, while spending on research and development jumped.
Revenues were essentially flat at US$28 billion.
“We continue to invest in the future through R&D and Capex spend across our businesses, including SI, robotics and energy,” said Tesla, referring to the Trump administration’s favoured term, “Super Intelligence” instead of artificial intelligence.
“Much hard work lies ahead, but we are as optimistic as ever,” the company added in the earnings release.
The results follow Musk’s disclosure on Tuesday that special committees of independent directors at both SpaceX and Tesla have been set up to discuss a merger of the two companies.
Analysts had been cautious about Tesla’s third-quarter financial performance heading into Wednesday’s release.
While third-quarter auto sales topped estimates due in part to an uptick in European markets amid high petrol prices, better sales have not always translated into a lift into Tesla’s bottom line.
Also impactful, capital spending more than doubled to US$4.7 billion.
The company has also faced questions about the rollout of Tesla’s robotaxi venture that has progressed much more slowly than hoped.
Musk has repeatedly made overly rosy forecasts about self-driving technology, as in 2019 when predicted there would be more than a million robotaxis the following year.
In Texas, where Tesla has focused its robotaxi launch, there are currently about 800 robotaxis, according to FSD Database.
Tesla’s release highlighted the September 3 launch of robotaxi services in Austin and said “cumulative unsupervised Robotaxi miles grew eightfold quarter over quarter.”
For much of this year, Tesla has also encountered scrutiny over a steep increase in annual capital spending to US$25 billion or more to fund ambitious programmes in artificial intelligence, robotics and autonomous driving.
But such issues have been upstaged by the prospects of a merger between the two Musk businesses, which have a combined equity value of more than US$3.5 trillion.
“We think it’s a matter of when, not if” the two companies combine, said CFRA Research equity analyst Garrett Nelson.
“That’s the whole issue,” Nelson said of a potential mega-deal. “Tesla as we know it today may not exist in six to 12 months.”
On SpaceX’s conference call on Tuesday night, Musk said the committees have not agreed on the terms of any deal and there is no guarantee they will.
Musk said the two companies could gain from working together on AI software, chip design, robotics and space-based computing.
Shares of Tesla rose 1.4 percent in after-hours trading. (AFP)