Tesla Beats EPS Expectations ($0.72 vs $0.60) but Misses Revenue Forecast ($25.18B vs $25.4B)

Tesla ($TSLA) reported earnings per share (EPS) of $0.72, beating the forecast of $0.60. However, its revenue came in slightly below expectations at $25.18 billion, compared to the forecast of $25.4 billion.

Tesla reported a free cash flow of $2.74 billion for Q3, surpassing the estimate of $1.61 billion. The company also posted a gross margin of 19.8%, beating the expected 16.8%. Looking ahead, Tesla anticipates slight growth in vehicle deliveries in 2024. The stock is extending its pre-market gains, currently up 5.5%.

Tesla Q3’24 Earnings Highlights:

Tesla’s adjusted earnings per share (EPS) came in at $0.72, beating the estimate of $0.60, and reflecting a 9% year-over-year (YoY) increase. Revenue was $25.18 billion, just below the expected $25.5 billion, but still up 8% YoY. Automotive revenue reached $20.02 billion, slightly missing the $20.4 billion estimate, with a 2% YoY growth. Energy generation and storage revenue jumped 52% YoY to $2.38 billion, while services and other revenue rose 29% YoY to $2.79 billion. Tesla’s gross margin was 19.8%, beating the 16.7% estimate.

Operating Metrics:

Operating income was $2.72 billion, surpassing the estimated $2.2 billion, with a significant 54% YoY increase. Free cash flow came in strong at $2.74 billion, well above the $1.61 billion estimate, marking a 70.2% increase compared to expectations. Capital expenditures were $3.51 billion, higher than the $2.56 billion estimate, representing a 43% YoY rise. Adjusted EBITDA was $4.67 billion, up 24% YoY, and the operating margin stood at 10.8%, improving by 323 basis points YoY.

Guidance & Outlook:

Tesla expects slight growth in vehicle deliveries for the full year of 2024 and predicts that energy deployments will more than double in the same period. The company is focused on expanding its product lineup, advancing AI development, and reducing manufacturing costs.

Cybertruck production has increased compared to the previous period.

Tesla stated: “We have deployed and are training ahead of schedule on a 29,000-unit cluster of NVIDIA’s H100 chips at our Gigafactory in Texas. We expect to have 50,000 H100 units by the end of October.”

Automotive Performance:

Tesla produced 443,668 Model 3 and Y units, a 6% YoY increase. Production of other models reached 26,128 units, up 91% YoY. Total deliveries amounted to 462,890 units, up 6% YoY. The cost per vehicle is approximately $35,100, the lowest cost of goods sold (COGS) per vehicle ever recorded. Tesla also earned $739 million from regulatory credits, the second-highest quarterly figure on record.

Strategic Updates:

Tesla is preparing to launch more affordable vehicles by the first half of 2025, staying on track with its plans. The Cybertruck was the third best-selling electric vehicle (EV) in the U.S. for Q3. Additionally, Tesla is expanding its vehicle lineup with new trims and paint options for the Model 3 and Y.

Energy Segment Highlights:

Tesla’s energy segment saw a gross margin of 30.5%, improving by 596 basis points from the previous quarter. Powerwall deployments reached record levels for the second consecutive quarter, and Megapack production is now at 200 units per week at the Lathrop facility. The Shanghai Megafactory is on schedule to begin shipping in the first quarter of 2025.

Commentary:

Tesla emphasized its commitment to making electric vehicles more affordable, increasing production, and maintaining profitability despite macroeconomic challenges.

Tesla expects modest growth in vehicle deliveries in 2024 despite challenging macroeconomic conditions. The company plans to begin production of new, more affordable models in the first half of 2025.

In Q3, Tesla reported a 6.4% increase in global deliveries to 462,890 vehicles, primarily driven by strong sales in China, although this fell short of analysts’ expectations.

CEO Elon Musk is shifting the company’s focus toward autonomous driving, AI, and robotics as future revenue sources, even as approximately 80% of revenue still comes from vehicle sales, with no new mass-market models released since 2020.

Tesla’s Investor Deck states that their mixed approach to current and next-gen vehicle platforms will yield lower cost reductions but support cautious growth. This raises concerns about new Gigafactories, including Giga Mexico, which Musk says hinges on the US presidential election results.

Elon Musk Announces Tesla’s Goal of Producing 2 Million Cybercab Units Annually by 2026, Targets $25K Price

“We’re confident that the Cybercab will hit volume production in 2026. Not just starting production, but reaching at least 2 million units per year once fully ramped up.”

Tesla Expects Capital Expenditure to Exceed $11 Billion in 2024, with Projections of $8 to $10 Billion for 2025 and 2026.

Elon Musk announced that Tesla plans to launch a public ride-hailing service in Texas and California by 2025. Currently, Tesla operates an internal service for employees in San Francisco with safety drivers, but Musk confirmed that the company has developed the software for autonomous ride-hailing. Expansion to other states is also possible.

Update (24th October, 2024)

Tesla’s stock surged 14% following Musk’s announcement that the company anticipates 20-30% growth in vehicle volume for the upcoming year.

Tesla is expected to return to growth as its cost-cutting measures take effect. Oppenheimer analysts noted in a research report that the company is successfully implementing a cost-reduction program and is poised to start producing a more affordable vehicle. They anticipate that Tesla will see growth and improved margins. Additionally, an increase in vehicle availability from traditional automakers is expected to lead more potential buyers to compare options, highlighting Tesla’s advantages in cost and technology. The company’s lithium procurement efforts have also contributed positively, although analysts warn that the benefits from lower battery costs may diminish once lithium prices stabilize. Shares have surged 17% to $249.73.

Tesla’s Cybercab Unveiling: A Pivotal Moment for Elon Musk and the Company’s Future