Tesla Q3 Earnings Beat Expectations, Stock Soars

by Yuki

Tesla Inc. (TSLA) released its third-quarter earnings after the market closed on Wednesday, showcasing mixed results. Despite the varied performance, the company’s stock surged as investors responded positively to an earnings beat, improved gross margins, and the announcement that a more affordable electric vehicle (EV) is slated for production next year.

In a call with investors, CEO Elon Musk projected that Tesla could achieve a volume growth of 20-30% in 2024, adding optimism to the earnings report.

Following the announcement, Tesla shares jumped over 11% in premarket trading on Thursday, potentially adding up to $80 billion to the company’s market valuation. For the third quarter, Tesla reported revenues of $25.18 billion, slightly below the $25.4 billion consensus estimate from Bloomberg but higher than the $25.05 billion reported in the previous quarter and the $23.40 billion from the same period last year. The company also posted adjusted earnings per share (EPS) of $0.72, surpassing the expected $0.60, and recorded an adjusted net income of $2.5 billion alongside free cash flow of $2.9 billion.

The company’s gross margin, a key metric for investors, was reported at 19.8%, significantly higher than the 16.8% forecasted by analysts.

In its earnings presentation, Tesla stated, “We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes. Preparations remain underway for our offering of new vehicles, including more affordable models, which we will begin launching in the first half of 2025.”

Earlier this month, Tesla had reported third-quarter deliveries that fell slightly short of market expectations, leading to a drop in stock price. The company delivered 462,890 vehicles in Q3, marking a 6.4% increase quarter-over-quarter and surpassing the 435,059 vehicles delivered in the same quarter last year. However, Wall Street had anticipated deliveries closer to 463,897.

The report noted that the refreshed Model 3 saw successful ramp-up in production, achieving lower costs of goods sold compared to the previous quarter. Additionally, production of the much-anticipated Cybertruck increased, achieving a positive gross margin for the first time.

Looking ahead, Tesla indicated it expects “slight growth” in vehicle deliveries for 2024, with Musk emphasizing the possibility of 20-30% growth as a “best guess” during the earnings call.

Prior to the Q3 announcement, Tesla shares had experienced an 11% decline since unveiling its robotaxi, known as the Cybercab, at its “We, Robot” event on October 10, held at the Warner Bros. studio lot in Burbank, California. Investors and analysts expressed a desire for more details regarding the Cybercab, including testing plans and development updates on Tesla’s sub-$30,000 EV, referred to as the Model 2.

During the conference call, Musk confirmed that the Cybercab is projected to reach volume production by 2026, with a target of producing 2 million units per year. He reiterated that Tesla is on track to commence production of new vehicles, including the more affordable EV, in the first half of next year. Furthermore, Musk mentioned that the company is currently testing robotaxi summoning and drives in the San Francisco area with safety drivers present.

In addition to its vehicle performance, Tesla reported a record gross margin of 30.5% in its Energy Generation and Storage segment, anticipating that this business will more than double year-over-year in 2024.

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