Tesla books record revenue of $24.9 billion with margin declining after price cuts

Tesla reported earnings after the bell, showing a record for quarterly revenue but lower margins thanks to price cuts and incentives. The stock price is essentially unchanged in after-hours trading.

• Revenue: $24.93 billion. That may not compare with the $24.47 billion expected by Refinitiv.
• Earnings: 91 cents per share adjusted. That may not compare with the 82 cents per share expected by Refinitiv.

Net income (GAAP) was $2.70 billion, an increase of 20% from last year. Operating income, however, was off 3% from the year-ago quarter at $2.40 billion.

By way of comparison, during the first quarter of 2023, Tesla reported net income of $2.51 billion on revenue of $23.33 billion. During the second quarter last year, Tesla reported net income of $2.27 billion on $16.93 billion in revenue.

Early this month, Tesla reported 466,140 total vehicle deliveries for the second quarter and said it had produced 479,700 electric vehicles. Deliveries are the closest approximation of sales that Tesla reports.

Those deliveries were higher than Wall Street expected, and were partly driven by incentives and discounts. Correspondingly, operating margins came in at 9.6%, the lowest for at least the last five quarters. Total gross margin came in at 18.2%, also a low for the same period.

Tesla explained in a shareholder deck that its lower margins in the second quarter resulted from reduced average sales prices “due to mix and pricing” of the cars it has been selling, and the cost of ramping up production of battery cells it designed in-house, known as the 4680 cells, among other factors.

Revenue from Tesla’s core automotive business rose 46% year-over-year to $21.27 billion, about a 6.5% increase sequentially. Its energy generation and storage revenue — from solar installations, and backup batteries — rose 74% year-over-year to $1.51 billion. With more vehicles on the road, Tesla’s “services and other” revenue, including fees for out-of-warranty vehicle repairs, rose 47% to $2.15 billion.

Tesla’s research and development costs rose to $943 million (from $771 million in the first quarter) with the company writing in a shareholder deck that it is focused on “being at the forefront of AI development,” and has started production of its Dojo “training computers.”

Tesla’s crossover, the Model Y, became the best-selling vehicle worldwide in the first quarter of 2023.

Retail shareholders are hoping the company will offer more updates on the Cybertruck on Wednesday’s earnings call, according to questions submitted beforehand on a platform run by Say Technologies.

In the past week, Tesla shared a photo on social media of what it said was the first Cybertruck ever built at its Austin, Texas, factory. However, the company had not yet disclosed specs or pricing for the sci-fi-inspired, angular pickup Musk originally debuted and promoted in 2019.

Besides Cybertruck details, retail investors posting on Say Technologies want updates on Tesla’s production of 4680 battery cells, which are seen as critical to ramping up production of the company’s class 8 Semi trucks and the Cybertruck; on Tesla’s development of a humanoid robot, referred to as the Tesla Bot or Optimus; and about a new factory Tesla said it will build in Mexico.

Investors are also seeking updates on the company’s progress toward developing an autonomous or robotaxi-ready vehicle. While Musk touted Tesla’s self-driving ambitions in 2016, he said the company would conduct a hands-free trip across the U.S. by the end of 2017. Tesla has yet to complete that mission.

Morgan Stanley analyst Adam Jonas wrote in a note earlier this week, “To keep the rally going, we think Tesla needs to prove it’s more than just an auto company.”

Musk, who is also the CEO of SpaceX and controlling shareholder and chief technology officer of social media company Twitter, recently started yet another new company, xAI, which he incorporated in Nevada. Musk said earlier this month that xAI plans to collaborate with both Tesla and Twitter, and that xAI would probably work with his EV business on the “silicon front” and on the “AI software front.”