- Tesla reported Q2 revenue of $28.2 billion, beating the consensus of $26.2 billion.
- However, Tesla's earnings were $0.33 per share, missing the $0.51 estimate, leading to a stock drop of about 15% to $319.69.
- The stock drop was specific to Tesla, as the S&P 500 fell only 1.2% during the same period.
- Despite the earnings miss, Tesla delivered a record Q2 deliveries of 480,126 vehicles.
- The average analyst price target for Tesla is near $412, implying a potential upside of 29%.
- Tesla's net margin has fallen to 3.7%, significantly below its three-year average of 8.7%.
- The automotive margin excluding regulatory credits slipped from 19.2% to 16.3% in one quarter.
- Tesla's free cash flow turned negative as capital spending more than doubled, with management guiding outlay above $25 billion.
- Profit pressure was attributed to heavy spending on AI, robotaxi, and stock-based compensation tied to CEO Elon Musk's pay award.
- Regulatory credit revenue collapsed 67% to $146 million.
- Services revenue rose 50% year over year, and energy storage deployments climbed 41% to 13.5 GWh.
Tesla's second-quarter earnings report revealed a stark contrast between revenue and profitability. The company reported a 57% drop in operating income to $398 million, leading to a 15% decline in stock value after the announcement. Despite achieving record deliveries of 480,126 vehicles, the adjusted earnings per share of $0.33 fell short of the $0.51 expected by analysts.23
Revenue rose 26% year over year to $28.2 billion, driven by strong vehicle sales, yet the net margin plummeted to 3.7%, significantly below its three-year average of 8.7%. The automotive margin also declined from 19.2% to 16.3% in just one quarter, indicating rising costs and competitive pressures.78
Free cash flow turned negative at -$1.1 billion as capital expenditures surged to $5.8 billion. The company is also facing challenges with regulatory credit revenue, which fell 67% to $146 million. Despite these setbacks, analysts remain optimistic, with a consensus rating of buy and a price target suggesting a 29% upside from current levels.9
Tesla's stock closed at $319.69, near the bottom of its 52-week range of $297.82 to $498.83, reflecting investor concerns over its profitability amidst heavy spending on AI and other initiatives.
“Tesla's $28.2 billion revenue beat the $26.2 billion consensus, but earnings of $0.33 per share missed the $0.51 estimate by nearly a third. Meanwhile, net margin has fallen to 3.7%, less than half its three-year average of 8.7%.”
Trefis
The Globe and Mail
