Tesla's Q3 Earnings Beat Expectations: Revenue Up 8%, Net Income Up 17%, Shares Surge 12%

Tesla's Q3 Earnings Beat Expectations: Revenue Up 8%, Net Income Up 17%, Shares Surge 12%On October 24, electric vehicle manufacturer Tesla released its third-quarter earnings report for 2024. The report showed that Tesla's Q3 revenue reached $25

Tesla's Q3 Earnings Beat Expectations: Revenue Up 8%, Net Income Up 17%, Shares Surge 12%

On October 24, electric vehicle manufacturer Tesla released its third-quarter earnings report for 2024. The report showed that Tesla's Q3 revenue reached $25.18 billion, up 8% year-over-year, exceeding analysts' average expectations of $25.37 billion. Net income reached $2.17 billion, a 17% year-over-year increase. On a non-GAAP basis, adjusted earnings per share were $0.72, beating analysts' average estimates of $0.58.

Tesla reported producing 469,796 electric vehicles in Q3, up 9% year-over-year, and delivering 462,890 electric vehicles, up 6% year-over-year. Tesla's overall Q3 performance surpassed analysts' expectations, with the company's stock surging nearly 12% in after-hours trading, adding over $60 billion to its market capitalization. On the day, Tesla's stock closed at $213.65 per share, down 1.98%.

Core Business Improves, Easing External Concerns

Tesla's Q3 earnings report put investors' minds at ease. The company's core business of manufacturing and selling electric vehicles has started to improve, which has reduced concerns about when Tesla will be able to produce new models like self-driving taxis. In a statement, Tesla said, "Despite persistent macroeconomic headwinds and investment cuts in the EV space, we remain focused on expanding our vehicle and energy products, reducing costs, and making key investments in AI and capacity."

By business segment, Tesla's core automotive business generated revenue of $20.02 billion in Q3, up 2% year-over-year. Energy generation and storage business revenue was $2.38 billion, up 52% year-over-year. Tesla's "services and other" business, which includes vehicle maintenance, generated revenue of $2.79 billion, up 29% year-over-year. Tesla stated that in the third quarter, the automotive business gross margin was 17.05% excluding sales of carbon emission credits, compared to 14.6% in the previous quarter and analysts' expectations of 14.9%.

Production Costs Decline, Cybertruck Turns Profitable for the First Time

Tesla said the labor and material costs to produce vehicles (cost of goods sold per vehicle) fell to an all-time low of around $35,100. Raw material prices for electric vehicle batteries have been declining, and Tesla said that this is one reason why the cost of goods sold per vehicle will decrease this year, but the impact will gradually weaken over time.

Tesla said its latest Cybertruck electric pickup truck "achieved positive gross margins for the first time." Despite the angular, steel-bodied pickup truck having been plagued by quality issues, Kelley Blue Book estimates that Tesla sold over 16,000 Cybertrucks in the United States in the third quarter.

Delivery Growth, Aiming to Break Last Year's Record

Earlier this month, Tesla said its Q3 electric vehicle deliveries grew by more than 6% year-over-year, marking the first quarterly increase after two consecutive quarters of declining deliveries. Tesla also projected that its electric vehicle deliveries for the year would surpass last year's 1.8 million, a prediction investors welcomed after expecting only a "modest increase" in deliveries this year. Tesla has delivered 1.29 million electric vehicles in the first nine months of this year. To break last year's record, the company needs to deliver another 514,925 vehicles.

In its shareholder meeting, Tesla mentioned that total EV production had reached 7 million by October 22, and the Cybertruck had become the third best-selling electric vehicle in the United States, behind the Model 3 and Model Y.

Supercharger Network Continues to Expand, Carbon Emission Credit Sales Reach Second-Highest Historical Level

Earlier this year, Tesla laid off a significant portion of its Supercharger team, but the company has continued to expand its Supercharger network. In the third quarter, the company added 2,800 Supercharger stalls, a 22% increase year-over-year.

Tesla also said on Wednesday that third-quarter revenue from selling carbon emission credits reached the second-highest level ever. This metric increased 33% year-over-year to $739 million but was lower than the $890 million achieved in the second quarter.

Intensifying Competition, Challenges for Tesla

Tesla is facing growing competition. In the Chinese market, it's mainly from BYD, Geely, and newer carmakers like Li Auto and NIO. In the US market, traditional automakers like Ford and General Motors are also starting to sell more electric vehicles.

Tesla significantly discounted its electric vehicles last year, causing its profit margins to drop sharply. The company shifted tactics this spring, offering a wider range of financing options and discounts, which analysts say could slow down the profit decline in the next few quarters.

Analyst Opinions

Thomas Monteiro, senior analyst at Investing.com, said, "The improvement in all metrics suggests that Tesla may finally have found the sweet spot between pricing and production costs, which has been the main issue affecting its stock performance since last year." He added, "The earnings report also downplays the urgency of launching a cheaper model."

Matt Britzman, a senior equity analyst at Hargreaves Lansdown and a personal Tesla shareholder, said, "Before the earnings release, the market was worried that Tesla's heavy incentives to drive sales in a challenging EV market would significantly hurt profitability; that doesn't seem to be the case."

Share Performance

Before its after-hours surge on Wednesday, Tesla's stock had fallen 18% in October, its worst month since January. As of Wednesday's close, Tesla's stock has fallen 14% this year, compared to a 22% gain for the Nasdaq during that time.

Conclusion

Tesla's Q3 earnings report beat expectations, with its core business performing well, production costs declining, the Cybertruck turning profitable, and deliveries showing growth. Although the company faces increasing competition, the earnings results offer some respite to Tesla shareholders.