Tesla ( TSLA ) reported mixed results for its latest quarter on Wednesday, with sales falling short of 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% from last year but lower than the $25.4 billion expected by analysts, according to FactSet (FDS) estimates. Tesla posted revenues of $23.3 billion in the third quarter of 2023 and $25.5 billion in the previous quarter.
Auto revenue rose 2% to $20 billion in the July-September quarter, accounting for the vast majority of Tesla’s revenue. Tesla said its energy generation and storage business earned $2.3 billion this quarter, up 52% year over year, but down from the $3 billion it earned last quarter. The “services and other revenue” category accounted for $2.79 billion, an increase of 29% compared to last year.
Earnings per share came to 62 cents, better than the 50 cents per share expected by Wall Street and the 53 cents per share last year. Tesla reported net income of $2.28 billion, above the $2.18 billion expected by analysts but well below the $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 under 20%, up 195 basis points compared to the same period in 2023, the company said. Operating income grew to $2.7 billion, up 54% from a year earlier, giving Tesla an operating margin of 10.8%.
Tesla’s cost of goods sold reached its lowest level yet, at about $35,100 per vehicle. Margins were helped by Tesla’s second-best quarterly performance in sales of regulatory credits to automakers that lagged in meeting carbon emissions requirements.
Tesla’s gross auto margins, excluding credits, rose 17.1% in the third quarter, up from the 14.7% expected by Wall Street and the 14.6% a quarter earlier. According to Gene Munster of Deep Water Management, it has been three years since Tesla recorded such a large quarterly improvement.
“With the price cuts now fully in the rearview mirror, we view this as a key piece for The Street to illustrate Tesla’s ability to expand its margins as the company continues its AI/FSD transformation in the coming years,” Wedbush said Securities analyst Dan Ives. of Tesla’s margins.
“The bulls will welcome a much-needed margin boost this quarter after a mixed 2024,” he added in a note to investors.
Shares of Tesla fell nearly 2% ahead of the company reporting earnings on Wednesday. The stock is up more than 9% in after-hours trading as of 5:30 PM ET.
During an earnings call Wednesday afternoon, analysts and investors were looking for a series of updates on Tesla’s plans for artificial intelligence — such as the recently unveiled 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 postponed 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 sold more than 1.29 million electric vehicles so far 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 (the 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 reach that goal, Tesla will need to sell more than 516,000 vehicles between October and December. Current analyst consensus has Tesla narrowly missing that delivery target, according to FactSet.
This is a breaking news story. Check back for updates.
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