Tesla Q3 Earnings: Revenue $28.05 Billion, Doubling Down on AI and Optimus Robots

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After the U.S. market closed on Wednesday, Tesla released third-quarter earnings that beat expectations, even though revenue from its automotive business declined. As of press time, the stock had fallen more than 3% in after-hours trading.

The earnings report showed that Tesla's third-quarter revenue was $28.05 billion, down 0.2% year over year, versus an estimate of $28.13 billion; adjusted earnings per share were $0.48, above the expected $0.44; adjusted EBITDA was $3.9 billion, above the expected $3.66 billion; third-quarter operating profit was $718 million, down 56% year over year, versus an estimate of $599.3 million; and gross margin was 19.6%, compared with 18% a year earlier and an estimate of 17.8%.

Tesla said in its earnings report that company revenue declined slightly compared with the same period last year, when revenue was $28.24 billion. Tesla's core automotive business revenue fell 3% year over year to $20.56 billion. Energy business revenue fell 16% to $2.88 billion.

However, growth in Tesla's services and other revenue offset part of the decline. Sales in those businesses rose 33% from a year earlier to $4.61 billion. Tesla blamed the weak automotive revenue and profit on lower average vehicle selling prices in the quarter and difficulty obtaining battery supplies to produce enough vehicles to meet its backlog.

Capital expenditure far below expectations

According to the earnings report, Tesla's third-quarter capital expenditure was $4.73 billion, compared with $2.25 billion a year earlier and an estimate of $7.95 billion; free cash flow was $1.53 billion, down 62% year over year, versus an estimate of -$4.99 billion.

On the earnings call, Tesla cut its full-year capital expenditure forecast to $20 billion from the previous $25 billion. Tesla Chief Financial Officer Vaibhav Taneja said the savings would come from "efficient capital deployment management, with plans to primarily use operating cash flow to fund capital expenditures."

Karobaar Capital chief investment officer Haris Khurshid commented, "Lower capital expenditure is only a positive if it does not sacrifice future growth potential. Tesla's future valuation is highly tied to the Robotaxi and Optimus humanoid robot businesses. I need clarity on whether these investments are merely being shifted between quarters or whether the rollout of the related businesses is much slower than expected."

It is understood that the funds will be used for the Optimus production line, AI computing, the Cybercab production line, and the Terafab chip plant that Tesla is building in cooperation with SpaceX.

Tesla announced that its Optimus robot has begun production at the Fremont factory. The company said in its earnings report: "While we will continue to improve the hardware and manufacturing process, we have demonstrated that Optimus's current manufacturing process is suitable for a commercial product."

Chief Executive Officer Musk said on the earnings call, "I expect it will take us at least a year—perhaps a bit longer—to reach the goal of 1 million units a year, or 20,000 a week." He also disclosed that Tesla may release a demonstration video of Optimus in about a month and stressed that he does not want the robot's movements to be pre-programmed.

In other AI areas, Tesla said it plans to reach 400 megawatts of AI training compute capacity by the end of the year.

Tesla also said its active FSD (Full Self-Driving) subscribers have climbed to 1.74 million. Ashok Elluswamy, Tesla's vice president of autonomy, said the company plans to make FSD available to some customer vehicles around the second quarter of next year.

Musk said, "The biggest driver of demand is Full Self-Driving."

On the merger

A day earlier, on SpaceX's earnings call, Musk made clear for the first time that a merger was under discussion.

"SpaceX and Tesla have formed special committees to discuss the idea," he said. "These special committees were formed at the request of shareholders, and their members are all independent directors. Because I have a conflict of interest, I cannot participate in the discussions of these special committees."

"I don't think we should take it for granted that a merger of SpaceX and Tesla is a done deal. I think saying that is a bit of an exaggeration. But do I think it's a good idea? Yes," he added.

On Tesla's call, Musk briefly mentioned the matter but did not disclose any new information.

"Regarding a potential merger with SpaceX, I think everything that needed to be said was said yesterday (Tuesday)," Musk said.

(Source: Cailian Press) Body middle Embedded ad