Photo: Tesla
Tesla's financial results in the third quarter failed Wall Street expectations, although the long-term perspective looks solid. Nevertheless, Elon Musk made it look much worse with a sober perspective about rising interest rates, challenging Cybertruck production, and geopolitical dangers.
Tesla presented some disappointing delivery numbers earlier this month, breaking a growth streak that kept investors pumped. To be fair, Elon Musk warned investors during the second quarter that production pauses were expected at several factories as the EV maker upgraded the production lines. Everyone expected the financial results in the third quarter to reflect this situation. Still, nobody was prepared for a gloomy Elon Musk telling investors that the situation was worse than it looks.
Word on the Street is that Elon was "all doom and gloom," sounded "defeated" and "sober." Tesla fans considered he was simply realistic and honest, although even die-hard Omar (@WholeMarsBlog) admitted that what Elon Musk did was exactly the opposite of "pumping the stock." And the stock indeed took a hit, dropping as low as $230 after the conference and accelerating an already steep decline on Wednesday (down 4.8% to $243).
Now, back to the financial results that disappointed Wall Street, Tesla was far from losing money in the quarter. It's just that they didn't earn as much as people hoped for. Tesla reported revenue of $23.5 billion, down from the $24.3-$24.4 billion Wall Street analysts expected. That equals $0.66 per share (non-GAAP) instead of $0.73 per share estimated. Mind you, this is still up nearly 9% year-over-year.
Even with lower revenue, Tesla was cash flow positive, with $0.8 billion added in the quarter, which means the company now sits on a $26 billion coffer. The results showcased Tesla's thinning profit margins after repeated price cuts. The company's GAAP gross margin was 17.9%, down from 18.2% in Q2 2023 and over 25% in Q3 2022. Operating margin was 7.6%, which is closer to what traditional carmakers usually report.
Tesla blamed the lower-than-expected results on an "increase in operating expenses driven by Cybertruck, AI and other R&D projects" and the "cost of production ramp and idle cost related to factory upgrades." Despite that, the company's perspectives are still solid. Tesla reduced the cost per vehicle to about $37,500 in the quarter and expects to grow deliveries by 50% year-over-year to 1.8 million units, as previously announced.
The brightest spots in the presentation were the Services and Other business section, which has become "the core driver of profit growth." Tesla Supercharger, insurance, as well as body shop and parts sales, are high-margin operations set to grow as the Tesla fleet grows by millions of cars every year. Tesla is focusing on expanding Supercharging capacity and further improving capacity management in anticipation of other carmakers joining our network.
Word on the Street is that Elon was "all doom and gloom," sounded "defeated" and "sober." Tesla fans considered he was simply realistic and honest, although even die-hard Omar (@WholeMarsBlog) admitted that what Elon Musk did was exactly the opposite of "pumping the stock." And the stock indeed took a hit, dropping as low as $230 after the conference and accelerating an already steep decline on Wednesday (down 4.8% to $243).
Now, back to the financial results that disappointed Wall Street, Tesla was far from losing money in the quarter. It's just that they didn't earn as much as people hoped for. Tesla reported revenue of $23.5 billion, down from the $24.3-$24.4 billion Wall Street analysts expected. That equals $0.66 per share (non-GAAP) instead of $0.73 per share estimated. Mind you, this is still up nearly 9% year-over-year.
Even with lower revenue, Tesla was cash flow positive, with $0.8 billion added in the quarter, which means the company now sits on a $26 billion coffer. The results showcased Tesla's thinning profit margins after repeated price cuts. The company's GAAP gross margin was 17.9%, down from 18.2% in Q2 2023 and over 25% in Q3 2022. Operating margin was 7.6%, which is closer to what traditional carmakers usually report.
Tesla blamed the lower-than-expected results on an "increase in operating expenses driven by Cybertruck, AI and other R&D projects" and the "cost of production ramp and idle cost related to factory upgrades." Despite that, the company's perspectives are still solid. Tesla reduced the cost per vehicle to about $37,500 in the quarter and expects to grow deliveries by 50% year-over-year to 1.8 million units, as previously announced.
The brightest spots in the presentation were the Services and Other business section, which has become "the core driver of profit growth." Tesla Supercharger, insurance, as well as body shop and parts sales, are high-margin operations set to grow as the Tesla fleet grows by millions of cars every year. Tesla is focusing on expanding Supercharging capacity and further improving capacity management in anticipation of other carmakers joining our network.
Q3 2023 Earnings Call https://t.co/eSwixzYTJD
— Tesla (@Tesla) October 18, 2023
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