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Tesla announces Q3 earnings: Automotive revenue grows 5% to USD 19.6 billion while operating profit drops by half

19 October 20234 mins read by Angel One
The company's stock has not performed well and has generated only a 10% return during the past year.
Tesla announces Q3 earnings: Automotive revenue grows 5% to USD 19.6 billion while operating profit drops by half
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Tesla, an American electric vehicle (EV) and clean energy company reported its quarterly earnings on October 18 during the market hour.

In the third quarter of FY23, the company’s total revenue grew by 9% year-over-year (YoY), from USD 21.45 billion to USD 23.35 billion.

Breaking down the total revenue, the total automotive revenue for the quarter stood at USD 19.6 billion, up 5% YoY from USD 18.7 billion. Meanwhile, energy generation and storage revenue saw a significant increase of 40%, going from USD 1.17 billion to 1.55 billion. Additionally, services and other revenue also experienced substantial growth during the quarter, up 32% YoY to USD 21.6 billion.

During the quarter, the company witnessed an increase in vehicle deliveries and growth in various segments of its business. However, it should be noted that there was a decrease in the average selling price (ASP) year-over-year.

Moving on to profits, the gross profit amounted to USD 4.18 billion, a 22% decrease YoY from USD 5.38 billion. The operating profit for the company during the quarter dropped by half compared to the corresponding quarter last year, coming in at USD 1.76 billion, down 52% YoY from USD 3.68 billion. The operating profit margin stood at 7.6% versus 17.2%.

Furthermore, the company’s net profit during the quarter was USD 2.3 billion, a decrease of 37% from USD 3.65 billion. Meanwhile, the company’s earnings per share (EPS) decreased from USD 1.05 per share to USD 0.66 per share.

Several key factors influenced the company’s operating income for the quarter. Firstly, there was a decline in the average selling price (ASP), attributable to pricing and product mix adjustments. Additionally, operating expenses increased due to investments in projects like Cybertruck, artificial intelligence (AI), and other research and development (R&D) initiatives. Costs related to the production ramp and expenses tied to factory upgrades also played a role in the income impact. Furthermore, adverse foreign exchange (FX) effects negatively affected the operating income.

On a positive note, the operating income was bolstered by growth in vehicle deliveries, even though new factories faced margin challenges due to underutilization. Furthermore, a reduction in the cost per vehicle and benefits from the Individual Retirement Account (IRA) credit contributed positively to the income. The company also experienced growth in gross profit, particularly in the Energy Generation and Storage, as well as Services and Other segments. Additionally, increased sales of regulatory credits contributed to the overall improvement in operating income.

Future Outlook: 

Volume: The company’s plan is to increase production in line with the 50% CAGR target. Growth rates may vary in different years, but for 2023, they are aiming for around 1.8 million vehicles.

Cash: The company has enough liquidity to cover the product roadmap, long-term expansion plans, and other expenses. They will also focus on maintaining a strong balance sheet during uncertain times.

Profit: As the company works on reducing manufacturing and operational costs, it anticipates that hardware-related profits will be complemented by increased AI, software, and fleet-based profits over time.

Product: Cybertruck deliveries are set to meet their schedule later this year, and the company is progressing on the next-generation platform.

Operational Performance: 

The company’s total production grew by 18% YoY during the quarter. However, Model S/X production experienced a decline of 31%, while Model 3/Y production achieved an impressive growth of 20% YoY. On the other hand, total deliveries during the quarter increased by 27% YoY, going from 343,830 units to 435,059 units.

Stock Performance: 

Yesterday, the company’s shares opened at USD 252.70 per share, reached an intraday high of USD 254.63 per share, and eventually closed the day at USD 242.68 per share, reflecting a 4.8% decline in its share price.

The current market capitalization of the company is USD 770.26 billion, and the stock has generated a 10.2% return within a year.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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