Tesla (TSLA) on Wednesday reported mixed earnings for its last quarter, with revenue failing to meet expectations, strong profits, and a renewed promise for more affordable vehicles on the way.
The Austin, Texas-based company reported revenue of $25.1 billion, up 8% compared to last year, but below the $25.4 billion expected by analysts, according to estimates compiled by FactSet (FDS). Tesla recorded revenue of $23.3 billion in the third quarter of 2023 and $25.5 billion during the prior quarter.
Automotive revenue grew by 2% during the July to September quarter to $20 billion, accounting for the vast majority of Tesla’s income. Tesla said its energy generation and storage business made $2.3 billion for the quarter, a 52% year-over-year increase but down from the $3 billion it made last quarter. The “services and other revenue” category accounted for $2.79 billion, a 29% increase compared to last year.
Earnings per share came in at 62 cents, beating the 50 cents per share as expected by Wall Street and the 53 cents per share last year. Tesla reported $2.28 billion in net income, more than the $2.18 billion expected by analysts but well below $3.14 billion a year ago. The company took a 45% year-over-year hit last quarter with net income of $1.5 billion.
The automaker’s gross margin was just shy of 20%, an increase of 195 basis points compared to the same time in 2023, the company said. Operating income grew to $2.7 billion, up 54% compared to a year earlier, giving Tesla an operating margin of 10.8%.
Tesla’s cost of goods sold hit its lowest level yet, at about $35,100 per vehicle. Margins were helped by Tesla’s second-best quarterly performance for sales of regulatory credits to automakers lagging behind on meeting carbon emission requirements.
Tesla’s gross automotive margins, excluding credits, were up 17.1% for the third quarter, compared to the 14.7% expected by Wall Street and 14.6% a quarter earlier. It’s been three years since Tesla notched such a major quarterly improvement, according to Deep Water Management’s Gene Munster.
“With price cuts fully in the rearview mirror now, we view this as a key piece for the Street to exemplify Tesla’s ability to expand its margins as the company continues its AI/FSD transformation over the coming years,” Wedbush Securities analyst Dan Ives said of Tesla’s margins.
“The bulls will cheer this quarter in a much needed margin boost after a choppy 2024,” he added in a note to investors.
Tesla shares fell by almost 2% leading up to the company making its earnings public on Wednesday. The stock is up by more than 9% in after-hours trading as of 5:30 p.m. ET.
During an earning call Wednesday afternoon, analysts and investors were looking for a series of updates on Tesla’s plans related to artificial intelligence — like its newly-revealed Cybercab concept — and electric vehicle sales.
Tesla’s earnings report reiterated its plans to launch more affordable options early next year. The company had reportedly scrapped or delayed its plans for the Model 2, a planned $25,000 electric car, to focus on the robotaxi, which was unveiled earlier this month.
Tesla has, so far, sold more than 1.29 million electric vehicles in 2024, including 462,890 units delivered between July and September. That doesn’t give the company much wiggle room to reach or beat 1.8 million sales — its 2023 record — by the end of the year. However, the automaker said in its report that it expects “slight growth” in deliveries this year.
To hit that target, Tesla will need to sell more than 516,000 vehicles between October and December. The current analyst consensus puts Tesla as narrowly missing that delivery target, according to FactSet.
This is a breaking news story. Check back for updates.
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