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Tesla energy revenue drops 16% as it refunds customers over tariffs
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Tesla’s energy generation and storage revenue fell 16% year over year to $2.88 billion in Q3 2026, even as battery deployments rose 10% to 13.7 GWh. The shareholder letter attributed the decline “partially” to “tariff-related customer refunds.” Tesla did not disclose the amount, affected customers, or revenue-accounting rationale.
The results complicated a segment once expected to steady Tesla. Energy gross margin rebounded to 33.1% from 20.4% in Q2. But gross profit slipped to $954 million from $1.07 billion a year earlier, and Tesla cited lower energy profit among reasons operating income dropped 56%.
Year to date, Tesla deployed 36 GWh, up 11% from 32.5 GWh in the same period of 2025. Energy revenue declined 6% to $8.43 billion. Q3 deployments also fell short of the roughly 15.9 GWh analysts expected.
Tariffs have repeatedly hit the segment. In Q1, Tesla reported “energy one-time benefits related to tariffs” and a 39.5% energy gross margin. After the Supreme Court struck down IEEPA tariffs in February, some storage customers may have paid charges Tesla no longer owed, though the letter did not confirm that.
Tesla is also trying to remove tariffs from its supply chain. Megafactory Texas began production with 50 GWh of planned capacity, alongside 40 GWh in California and 20 GWh in Shanghai. Tesla shipped its first Megapacks built entirely with its own LFP cells from Nevada, which has 7 GWh of cell capacity in early ramp.
Tesla said storage demand is at its “highest-ever order rate and backlog,” driven by data centers needing power faster than the grid can deliver. xAI, now part of SpaceX, bought another $269 million of Megapacks this year after $430 million in 2025. Commentary praised Tesla for refunding customers but criticized the lack of quantification around tariff costs.
