Tesla Q3 Earnings: Profits Surpass Expectations, But Revenue Falls Short

Tesla Q3 Earnings: Profits Surpass Expectations, But Revenue Falls Short

Tesla reported third-quarter earnings that exceeded analysts’ expectations, although revenue slightly missed projections.

Tesla’s Q3 Earnings Summary:

• Earnings per share: Adjusted 72 cents (expected 58 cents)
• Revenue: $25.18 billion (expected $25.37 billion)
  
  

Tesla’s revenue rose by 8% year-over-year, increasing from $23.35 billion to $25.18 billion. Net income also increased to approximately $2.17 billion, or 62 cents per share, compared to $1.85 billion, or 53 cents per share, a year ago.

Profit Margin Boosters: Tesla benefited from $739 million in automotive regulatory credit revenue, significantly improving its profit margins. Automakers must acquire a certain amount of regulatory credits annually, and if they fall short, they purchase these credits from companies like Tesla, which has surplus due to its exclusive focus on electric vehicles.

Automotive and Energy Segment Performance: Tesla’s automotive revenue grew 2% year-over-year to $20 billion, while energy generation and storage revenue surged 52% to $2.38 billion. Additionally, services and other revenue, which includes revenue from non-warranty Tesla vehicle repairs, rose 29% to $2.79 billion.

Tesla also highlighted that as of October 22, it had produced 7 million vehicles and that its newest model, the Cybertruck, became the third-best-selling electric vehicle in the U.S., trailing only the Model 3 and Model Y. Despite quality issues with the Cybertruck, the company sold more than 16,000 units in the U.S. during the third quarter, achieving a positive gross margin for the first time.

Tesla CEO Elon Musk stated on the earnings call that vehicle growth is expected to reach 20% to 30% next year, driven by “lower cost vehicles” and the “advent of autonomy.”

In the third quarter, Tesla reported deliveries of 462,890 vehicles, which is the closest measure to sales reported by the company. While deliveries increased 6% year-over-year, they fell short of analysts’ expectations, following two consecutive quarters of year-over-year declines. Tesla has been offering various discounts and incentives to boost sales.

“Despite ongoing macroeconomic conditions, we expect slight growth in vehicle deliveries in 2024,” the company stated in its earnings deck. Tesla also reiterated its plan to launch more affordable models in the first half of 2025.

Tesla is facing increasing competition, particularly in China, from companies like BYD and Geely, as well as new players such as Li Auto and Nio. In the U.S., legacy automakers Ford and General Motors are expanding their electric vehicle portfolios, although they’ve scaled back some electrification plans.

This earnings report comes just weeks after Tesla’s highly anticipated robotaxi event, which left investors wanting more details, and about two weeks before the U.S. presidential election. Tesla CEO Elon Musk has spent significant time campaigning for former President Donald Trump, raising questions from shareholders about the impact of Musk’s political activities on Tesla’s stock price.

Despite the after-hours jump following the earnings report, Tesla stock was down 18% in October, on track for its worst month since January. For the year, shares were down 14%, while the Nasdaq was up 22%.

Musk has spent tens of millions of dollars to support Trump’s return to the White House, even though the former president opposes the types of federal spending on electric vehicles, charging infrastructure, and environmental regulations that have benefited Tesla over the years. Musk also recently commented that he views many U.S. government agencies and regulations as ineffective and unnecessary.

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