Tesla earnings recap: Stock jumps 12% after hours as company reports big quarterly profit beat

Musk says Tesla and xAI have helped each other, but notes the two companies have different problems they're aiming to solve. While Tesla is trying to make autonomous cars and robots, xAI is working on AGI, or superintelligence.

Tesla's CFO said "not all AI is equal." While there are areas of collaboration, for the most part, they're responding to different issues, he says.

That's a wrap! The call concludes after just two questions from analysts.

In a follow-up question about regulatory approval in California and whether Tesla plans to launch with human supervisors to start or fully driverless, Tesla said it will follow local regulations and "each state has different requirements" with regards to mileage and needing a safety driver.

"We think we'll be able to have driverless Teslas doing paid rides next year, sometime next year," Musk says.

Tesla spent the first hour of the call going over prepared remarks and answering pre-submitted questions from retail investors.

The executives say they will now turn to questions from analysts in the final minutes of the call.

That's why it hasn't come out yet, according to Musk.

The CEO says Tesla's larger mission is "to accelerate the progress towards a sustainable energy future." He says the Roadster has to come behind products that "have a more serious impact on the growth of the world." However, he said Tesla is "finally making progress" on the new Roadster and finalizing the design.

"So just thank you to all our suffering Tesla Roadster deposit holders," Musk says.

"It's really going to be something spectacular," Musk adds.

Musk wants national approval for full autonomy.

Asked about Tesla's timeline for regulatory approval, Musk says "California loves regulation."

Musk says there is a "pathway" for regulatory approval — "obviously Waymo operates in California."

Musk reiterates he would "be shocked" if they didn't get approval next year. Tesla says toward the end of the year, approval will branch out beyond California and Texas.

Musk references Trump's proposed government efficiency council, saying "if there's a department of government efficiency, I'll try to help make that happen."

Tesla says that Pepsi's drivers using the Tesla Semi don't want to go back.

"The electric Semi is the choice," Musk says. "Their top drivers get to drive the Tesla Semi."

Tesla says a couple of hundred Semis have been deployed already and have the cameras and sensors necessary for full FSD.

Musk shouts out how it will help with driver fatigue and anti-jackknifing features.

Tesla expects Semi production to ramp up throughout the year to full production and "growth will largely depend on our customers' adoption of the product."

Musk says Tesla is all in on autonomous vehicles, and it wouldn't make sense to make a more affordable car or version of the Cybercab that isn't autonomous-focused.

The Tesla CEO says a "regular $25K model is pointless. It would be silly."

Tesla says the "mission has always been to lower the cost of the vehicles," as well as raise the adoption of sustainable energy and transport.

Musk and the other Tesla execs begin answering questions — first up are some of the questions submitted by retail investors on Tesla's website ahead of the call.

Musk closes out his prepared remarks by saying that if Tesla executes its mission, it will become the most valuable company in the world.

He then turns things over to Tesla's CFO, who talks about factors contributing to Tesla's gross margin.

He says the opportunity ahead is "gigantic" for the enterprise-focused energy business. He shouts out that Megapack factory production reached 200 Megapacks a week in the third quarter.

"We showed a massive improvement in optimistic starting movement on October 10," Musk says.

The CEO says he feels "confident" that Tesla has the "most advanced humanoid robot" and that it's the only company with "all the ingredients" to scale humanoid robots.

He says Optimus has a "good chance of being the most valuable product ever."

Musk says there's "quite a long regulatory approval process" but it should get approved next year.

Musk said Texas is "much faster" in regards to regulatory approval, but he still expects the app to launch in both states next year. He said it might be available in other states eventually as well.

If the stock opens above that mark when the market opens tomorrow morning, that would erase the losses since the Cybercab event.

Musk said there's a continuous improvement "from week to week" in the miles between interventions of Tesla's beta software, which requires a human to be ready to take over at any point.

He said he expects to see roughly a five or six-fold improvement in miles between interventions in the next version of FSD.

Musk says he predicts Cybercab will reach volume production in 2026, aiming for at least 2 million units a year in more than one factory.

Musk has previously talked about the 2026 estimate, or "by 2027" as he said at the "We, Robot" event.

Musk hedges here. "These are just my best guesses," Musk says.

Musk opens the call shouting out Tesla's Q3 profitability, noting it's a record third quarter for the company.

Tesla's head of investor relations Travis Axelrod kicks off the analyst call with prepared remarks. Tesla CEO Elon Musk is also on the call.

The stock fell sharply after Tesla's "We, Robot" event, where Musk showed off the Cybercab robotaxi and a "Robobus" electric bus.

The stock is trading around $233 in after-hours trading ahead of Tesla's call with analysts — around $5 below where it was trading before the Cybercab event.

Tesla fans hoping for an update on the production of the new Roadster were greeted with a lone mention of the vehicle.

Tesla lists its status as "in development" and says the production location is "TBD."

The Tesla CEO has been promising the return of the Roadster since 2017, teasing a new version of the sports car at the unveiling of the Tesla Semi.

Musk has said in March that Tesla and SpaceX are collaborating on the Roadster, which has faced delays.

"It's gonna be really cool, and it's gonna have some rocket technology in it," Musk said at the time. "The only way to do something that's cooler than the Cybertruck is to combine SpaceX and Tesla technology to create something that's not even really a car."

Musk may talk more about the status of Roadster production on the 5:30 p.m. ET call with analysts.

In the outlook section of its earnings presentation, Tesla says — as it has in the past quarters — that it's "currently between two major growth waves."

It still predicts it will end the year with positive growth in vehicle deliveries.

"Despite ongoing macroeconomic conditions, we expect to achieve slight growth in vehicle deliveries in 2024," Tesla says.

Musk previously said in April that Tesla was accelerating plans for cheaper vehicles after denying a report that Tesla had scrapped a $25,000 "Model 2" in favor of the Cybercab robotaxi.

"Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025," Tesla says in its earnings release on Wednesday. "These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up."

During its earnings call with analysts, Tesla often takes time to answer some questions from its retail investors on the company's online forum.

Tesla's FSD remains the most popular topic on Tesla's anonymous online forum ahead of the call, with over 200 questions ranging from regulatory approval to expected timelines.

Other Tesla investors submitted questions about Musk's political involvement in former President Donald Trump's campaign.

"Elon Musk has the right to express his political views, but his public activism seems at odds with his responsibility as CEO to protect shareholder value," one question with 171 upvotes said. "How does Tesla address this, and can it confirm Musk's actions are not harming sales or growth?"

Other popular topics include Optimus, Tesla's Cybertruck, and the Cybercab robotaxi.

Tesla stock jumped as much as 7% after the company reported a profit beat in the third quarter and said it expects slight growth in vehicle sales for 2024.

Here are the results:

Third Quarter

• Adjusted EPS: $0.72 vs estimate of $0.60
• Earnings per share: $0.62 vs estimate of $0.51
• Revenue: $25.18 billion vs estimate of $25.43 billion
• Gross margin: 19.8% vs estimate of 16.8%
• Operating income: $2.72 billion vs estimate of $1.96 billion
• Free cash flow: $2.74 billion vs estimate of $1.61 billion
• Capital expenditure: $3.51 billion vs estimate of $2.56 billion

Shares of Tesla traded down about 2% heading into the company's earnings report, trading at around $214.32 at 3:42 p.m.

The losses were about double the S&P 500's loss of 1% and slightly more than the Nasdaq 100's 1.65% decline.

The Wedbush analyst Dan Ives is staying bullish on Tesla stock, arguing that the company should show a return to growth in its third-quarter earnings call and forward guidance.

"We expect generally in-line 3Q headline numbers with some slight upside likely on the margins front showing a bottoming on this key metric," Ives said in a recent note.

Ives argued that Tesla should be able to deliver 1.8 million vehicles in 2024 and that the figure should rise to more than 2 million vehicles in 2025.

But perhaps more important than vehicle deliveries for Wall Street is Tesla's profit margins.

"Margins will be a key focus on the conference call," Ives said.

He added that investors would want to see this metric in the high teens for the third and fourth quarters and heading toward 20% in 2025. That should soothe fears about further price cuts and convince investors that better days are ahead, Ives said.

Wedbush rates Tesla at "outperform" with a $300 price target.

After Tesla reported disappointing third-quarter deliveries this month, Wells Fargo said it expects the company to make up for the shortfall in sales by offering "aggressive finance promos globally."

"We est. the Q3 promotions are equivalent to ~8% lower effective px cut," analyst Colin Langan said in a note last week, adding that he expects the company to miss Wall Street's third-quarter earnings estimates.

Langan predicted that Tesla's automotive gross margin, excluding credits, would be 13.6% in the third quarter, down from 14.6% in the previous quarter.

Wells Fargo rates Tesla at "underweight" with a $120 price target.

"With Tesla's Robotaxi Day passed, we believe the focus for Tesla at least for now shifts back to fundamentals," the Barclays analyst Dan Levy said in a note last week.

Levy expects Tesla to beat earnings estimates, predicting earnings per share of $0.68 versus the consensus estimate of about $0.60.

"After a run of sharply negative revisions to earnings estimates, Tesla estimates have largely stabilized," Levy said. "Volumes are expected to be flat y/y, margins have troughed and are set to improve, reg credit revenue can be a solid boost as other OEMs rely on Tesla to achieve compliance, Tesla Energy is generating solid growth, and opex may trend lower for now as Tesla realizes the cost saves of headcount reductions."

Those points, along with the fact that Tesla stock sold off after its robotaxi event, give Levy confidence that the company's third-quarter earnings will be a catalyst for the stock.

Levy said that, aside from discussing the earnings results and guidance on its conference call, any commentary about plans for a lower-cost vehicle could move the stock.

"We also wouldn't dismiss the notion that Tesla could forgo a 'Model 2.5,' instead focusing its resources on rolling out the AV strategy," Levy said, referring to the firm's autonomous-vehicle ambitions. He added that investors would treat such a development as a negative for the stock.

Barclays rates Tesla at "equal weight" with a $220 price target.

Tesla's aggressive price cuts of 20% over the past year, combined with a plunge in trade-in values for Tesla vehicles, suggest there's "more pain to come," said Joel Levington, a director of credit research at Bloomberg Intelligence.

Levington argued in a note on Tuesday that Tesla's price declines were putting its luxury brand identity at risk.

Levington added that with Tesla facing more competition, it needs to release a lower-cost vehicle.

"Tesla is poised to give up share as rivals from Acura to Volvo create a tsunami of new EV products that will flood the markets, making the lower-cost Model 2 and updates of its data product line critical," Levington said.

According to data from Bloomberg, here's what Wall Street is expecting from Tesla's third-quarter earnings report.

Third Quarter

• Adjusted EPS estimate: $0.60c
• EPS estimate: $0.51
• Revenue estimate: $25.43 billion
• Gross margin estimate: 16.8%
• Operating income estimate: $1.96 billion
• Free cash flow estimate: $1.61 billion
• Capital expenditure estimate: $2.56 billion

Full Year

• Production estimate: 1.7 million
• Deliveries estimate: 1.79 million
• Capital expenditure estimate: $10.08 billion

The market is now open, and Tesla stock is trading slightly higher, up about 0.2% at just over $218.

That brings the year-to-date decline to about 12%, with the company valued at $682 billion — still a long way from its record valuation of about $1.2 trillion in late 2021.

Tesla investors want more details about its long-rumored affordable electric car.

Elon Musk has said the company plans to build a $25,000 EV.

Ahead of the earnings, retail investors have been submitting questions for Musk and other executives in an anonymous Q&A forum.

"Is Tesla still on track to deliver the more affordable model next year, as mentioned by Elon earlier, and how does it align with your AI and product roadmap?" read the top-voted question on the platform, with nearly 5,000 votes representing holders of some 2.2 million Tesla shares.

Despite the recent shift in focus, Tesla still makes the majority of money from selling EVs — something that Wall Street is all too aware of.

Investors will be watching revenue and profit margins closely, looking for details after the high-level plans announced at Tesla's "We, Robot" event.

Lukman Otunuga, senior market analyst at FXTM, says Tesla is already battling a turbulent year: "All eyes will be on the impact of price cuts and the outlook for Q4, as these could be key drivers for future performance. Markets are expecting a 6% move in either direction post-earnings."

The stock is down about 0.5% in premarket trading and has dipped 12% this year.

Tesla is fresh off the launch of its recent robotaxi.

According to Musk, the upcoming driverless vehicle, which is expected to cost less than $30,000, will be in production before 2027. The Tesla CEO also said the company would have unsupervised, fully autonomous vehicles on the road in California and Texas next year.

The targets have been met with skepticism by some analysts, with Musk himself noting his tendency to be optimistic on timelines.

To turn Tesla into a robotaxi empire, Musk also needs to overcome regulatory challenges facing Tesla's Full Self-Driving technology. Regulators are already probing the tech after reports of crashes in low-visibility areas.

Some investors have also been less than enthusiastic about the plan.

Ross Gerber, a longtime Tesla investor, said the carmaker is making a big strategy error by focusing on full self-driving cars and robots.

He stressed that Tesla makes nearly all of its money on electric vehicle sales and still faces challenges in its robotics efforts.

"I didn't think it was that bad per se, I just thought that their basic strategy is flawed, and I think that became pretty glaringly evident last night by completely pivoting to robots and trying to basically shun their EV sales business, which is really 95% of their revenue," Gerber told Schwab Network shortly after Tesla's "We, Robot" event. "I think they're making a crucial mistake."

However, Musk's recent success with SpaceX may boost investor confidence in his ability to deliver. The company made history earlier this month when it returned its Super Heavy booster to its launch site in Texas.