Key takeaways from Tesla’s earnings report as shares gain

Tesla (NASDAQ:TSLA) rallied in after-hours trading on Wednesday after breaking a streak of missing EPS estimates with its last four quarterly reports and reiterating that it plans to make EVs affordable.

The electric vehicle giant reported revenue was up 7.8% year-over-year in Q3 to $25.18 billion. EPS came in at $0.72 vs. $0.60 consensus and $0.66 a year ago. The EPS tally was up notably from the $0.52 mark in Q2. GAAP net income for the quarter was $2.2 billion and non-GAAP net income was $2.5 billion.

Margins march higher

Operating margin was reported at 10.8% of sales to improve from last quarter’s mark of 6.3%, and top last year’s mark of 7.6%. Total GAAP gross margin was 19.8% vs. 17.9% a year ago and 18.0% in the prior quarter. Adjusted EBITDA was $4.67 billion vs. $3.76 billion a year ago. For the quarter, the EV juggernaut’s adjusted EBITDA margin rose to 18.5% of sales from 16.1% a year ago.

Deliveries

Tesla (TSLA) had already disclosed 462,890 deliveries for Q3. The electric vehicle maker said it produced 469,796 vehicles during the quarter. Tesla (TSLA) noted that 3% of the deliveries were subject to operating lease accounting. For reference, Tesla (TSLA) delivered 443,956 vehicles in Q2 of this year and 435,059 vehicles in Q3 of last year. Tesla’s (TSLA) all-time deliveries record was 484,507 vehicles in Q4 of 2023. Looking ahead, Tesla (TSLA) reiterated that plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025.

More than just EVs

Tesla (TSLA) said energy storage deployments decreased sequentially in Q3 to a record 6.9 GWh, but were up 75% Y/Y. Overall, Tesla (TSLA) said energy services and other businesses are becoming increasingly profitable parts of the company. “As energy storage products continue to ramp, and our vehicle fleet continues to grow, we are expecting continued profit growth from these businesses over time,” noted TSLA. The company also said that it deployed and is training ahead of schedule on a 29k H100 cluster at Gigafactory Texas, where it expects to have 50k H100 capacity by the end of October.

Balance sheet

Tesla (TSLA) ended the quarter with a cash position of $33.6 billion. The sequential increase of $2.9 billion was a result of positive free cash flow of $2.7 billion. Operating cash flow was $6.3 billion during the quarter.

Tale of the tape

Shares of Tesla (TSLA) jumped 6.69% in after-hours trading to $213.57 after showing some weakness in the week ahead of the earnings report. The TSLA conference call is scheduled for 5:30 p.m. ET and could feature details on the highly anticipated mass-market electric vehicle. Sector peers to watch in after-hours trading include Lucid Motors (LCID), Rivian Automotive (RIVN), NIO (NIO), Li Auto (LI), XPeng (XPEV), ZEEKR Intelligent (ZK), Faraday Future (FFIE), General Motors (GM), and Ford (F).

Analyst reactions

Victor Dergunov, Investing Group Leader for The Financial Prophet: “Tesla delivered a split report, beating the bottom-line estimate by 12 cents (20%), demonstrating robust outperformance. On the downside, Tesla missed its consensus sales estimate by $490 million (1.8%). However, revenue still increased by around 8% YoY. The most significant takeaway is that Tesla’s profitability improved more than anticipated, which was a primary concern going into the report. Moreover, the substantial EPS outperformance implies that Tesla could continue improving profitability more than expected as we advance. The share price is reacting well in after hours, and Tesla remains a strong buy here while it is still cheap.”

Ahan Vashi, Investing Group Leader for The Quantamental Investor: “Bolstered by record Energy Generation & Storage margins and stronger-than-expected Regulatory Credits revenue, Tesla handily beat earnings expectations for Q3 2024 – EPS 72 cents vs. consensus of 58 cents. With TSLA stock jumping +7.5% after-hours, the earnings beat is clearly overshadowing Tesla’s revenue miss. While Tesla’s We, Robo” event was a disappointment due to the lack of real timelines on the cybercab, robovan, and optimus, Tesla’s Q3 2024 report looks solid – with top-line and operating margins in expansion mode once again. I continue to like the idea of buying Tesla in the $180-210 range.”