Investor's Corner
Tesla releases Q2 results: Sets quarterly production record
This is a quick cut of the main items from the shareholder letter outlining Tesla Q2 financial results:
Summary
- Completed Model 3 design phase
- Increased automotive gross margin on both Model S and Model X
- Exited Q2 consistently producing nearly 2,000 vehicles/week
- Production and demand on track to support 50,000 deliveries in 2H 2016
- Merger agreement to acquire SolarCity signed, subject to shareholder vote
Production
“In Q2, we delivered 14,402 new vehicles consisting of 9,764 Model S and 4,638 Model X, which was slightly higher than what we stated in our July announcement. Model S remains the market share leader in North America and Europe among all comparably priced four-door sedans, and Model X is quickly gaining ground against similarly priced SUVs in all regions.”
“We exited Q2 consistently producing nearly 2,000 vehicles per week and our total Q2 production of 18,345 vehicles constituted a new quarterly production record, up 18% from Q1 and up 43% from Q2 last year.”
These numbers are in line with the 14,370 new vehicles deliveries and the “just under 2,000 vehicles per week” reported in the July 3rd release. So nothing new here.
One good number is that “production hours per vehicle also declined throughout the quarter for both cars”, indicating the ability to continue to produce more cars per hour.
Gigafactory
“Gigafactory construction remains on target to support volume production of Model 3 in late 2017, and we recently accelerated construction to reach a rate of 35 GWh/year of cell production in 2018. This will allow us to meet the needs of our accelerated Model 3 production plan.”
Notice that the 35GWh/year of cell production is currently the total worldwide output.
Earnings
“Our Q2 GAAP net loss was $293 million or a $2.09 loss per share on 140 million basic shares, while our non-GAAP net loss was $150 million, or a $1.06 loss per basic share. Both figures include a $0.05 per basic share loss related mostly to losses from foreign currency transactions.”
According to MarketWatch, “Analysts polled by FactSet [expected] Tesla to report an adjusted loss of 59 cents a share in the second quarter. […] Estimize, which crowdsources estimates from analysts, fund managers, and academics, expected Tesla to report a loss of 54 cents a share, based on 379 estimates.”.
Loss is higher than anticipated. This number scared a few traders that bid the stock lower to 217 in after hours trading, but the stock quickly retraced back to 228, higher than the daily close. For a company like Tesla, where the price is based on future expectations, the earning numbers are really not what counts.
Revenue
Total Q2 GAAP revenue was $1.3 billion, while non-GAAP revenue was $1.6 billion for the quarter, up 31% from a year ago. Total Q2 gross margin was 21.6% on a GAAP basis and 20.8% on a non-GAAP basis.
Also according to MarketWatch, “FactSet analysts [were] expecting sales to reach $1.63 billion in the quarter, compared with $1.20 billion in the second quarter of 2015. […] Estimize [was] expecting sales of $1.55 billion.”
Revenue is pretty much matching expectations, and this will be seen positively by Wall Street.
Gross Margins
“Q2 Automotive gross margin was 23.1% on a GAAP basis. On a non-GAAP basis, gross margin excluding ZEV credits increased over 200 basis points from Q1 to 21.9%. We recognized an insignificant amount of ZEV credit revenue in Q2. The strong sequential gross margin increase was primarily due to improved manufacturing for Model X and favorable pricing for Model S. Our warranty accrual rates on new vehicles were generally consistent with Q1.”
Another good number that Wall Street likes a lot: increasing gross margins!
“We delivered fewer cars in Q2 than originally planned as a result of our steep production ramp, which resulted in almost half of Q2 production occurring in the final four weeks of the quarter. Given inflection points in the production ramp and firm shipping cutoffs, shifting production by even a short period of time had a disproportionate impact on the number of cars that were delivered by quarter end.”
This is also nothing new as it was originally disclosed in the July 3rd release.
Services
“Q2 Services and other revenue was $88 million, up 15% from a year ago but down sequentially. The decline was primarily due to having fewer pre-owned cars to sell because of the need to use them to expand our service loaner fleet. Q2 Service and other gross margin was 2.5%, down from 4.7% in Q1, but generally in line with our expectations.”
Stores
“We are also accelerating store openings and plan to add a new retail location every four days on average during the remainder of Q3 and through Q4. We are adding stores in new population-dense markets like Taipei, Seoul, and Mexico City, while also adding stores in our most mature markets like California.”
That is about 45 new stores by the end of the year.
Outlook
“Production and demand are on track to support deliveries of approximately 50,000 new Model S and Model X vehicles during the second half of 2016.”
Given the Q1 and Q2 reported deliveries, the 2016 deliveries are now slated to be around 79,000, pretty close to the bottom of the previously reported 80,000 to 90,000 range.
“Vehicle production efficiency is improving rapidly and we are now increasing our weekly production rate even further. Barring any further supply constraints, we plan to exit Q3 with a steady production rate of 2,200 vehicles per week, and plan to increase production to 2,400 vehicles per week in Q4.”
“Despite the disciplined pace of capital spending in the first half of this year, we still expect to invest about $2.25 billion in capital expenditures in 2016, in support of our accelerated production plan for Model 3.”
What is not there
Surprisingly there is nothing in the letter about the pending $2.6 billion SolarCity acquisition.
Full Q2 Results
From the Tesla Q2 Shareholder Letter.
Initial Market Reaction
$TSLA stock immediately dropped to $217 right after the close of regular market trading, but after about an hour of extended hours trading it was back to the previous daily close of $225.30, indicating that we should not expect much fireworks when the stock market reopens on Thursday.
Wall Street seems relieved that the weekly production numbers are in line with expectations, and that the corresponding “production ramp” is still in play.
Elon Musk
Tesla stock gets latest synopsis from Jim Cramer: ‘It’s actually a robotics company’
“Turns out it’s actually a robotics and Cybercab company, and I want to buy, buy, buy. Yes, Tesla’s the paper that turned into scissors in one session,” Cramer said.
Tesla stock (NASDAQ: TSLA) got its latest synopsis from Wall Street analyst Jim Cramer, who finally realized something that many fans of the company have known all along: it’s not a car company. Instead, it’s a robotics company.
In a recent note that was released after Tesla reported Earnings in late January, Cramer seemed to recognize that the underwhelming financials and overall performance of the automotive division were not representative of the current state of affairs.
Instead, we’re seeing a company transition itself away from its early identity, essentially evolving like a caterpillar into a butterfly.
The narrative of the Earnings Call was simple: We’re not a car company, at least not from a birds-eye view. We’re an AI and Robotics company, and we are transitioning to this quicker than most people realize.
Tesla stock gets another analysis from Jim Cramer, and investors will like it
Tesla’s Q4 Earnings Call featured plenty of analysis from CEO Elon Musk and others, and some of the more minor details of the call were even indicative of a company that is moving toward AI instead of its cars. For example, the Model S and Model X will be no more after Q2, as Musk said that they serve relatively no purpose for the future.
Instead, Tesla is shifting its focus to the vehicles catered for autonomy and its Robotaxi and self-driving efforts.
Cramer recognizes this:
“…we got results from Tesla, which actually beat numbers, but nobody cares about the numbers here, as electric vehicles are the past. And according to CEO Elon Musk, the future of this company comes down to Cybercabs and humanoid robots. Stock fell more than 3% the next day. That may be because their capital expenditures budget was higher than expected, or maybe people wanted more details from the new businesses. At this point, I think Musk acolytes might be more excited about SpaceX, which is planning to come public later this year.”
He continued, highlighting the company’s true transition away from vehicles to its Cybercab, Optimus, and AI ambitions:
“I know it’s hard to believe how quickly this market can change its attitude. Last night, I heard a disastrous car company speak. Turns out it’s actually a robotics and Cybercab company, and I want to buy, buy, buy. Yes, Tesla’s the paper that turned into scissors in one session. I didn’t like it as a car company. Boy, I love it as a Cybercab and humanoid robot juggernaut. Call me a buyer and give me five robots while I’m at it.”
Cramer’s narrative seems to fit that of the most bullish Tesla investors. Anyone who is labeled a “permabull” has been echoing a similar sentiment over the past several years: Tesla is not a car company any longer.
Instead, the true focus is on the future and the potential that AI and Robotics bring to the company. It is truly difficult to put Tesla shares in the same group as companies like Ford, General Motors, and others.
Tesla shares are down less than half a percent at the time of publishing, trading at $423.69.
There are a lot of Tesla bulls out there who have astronomical expectations for the company, especially as its arm of reach has gone well past automotive and energy and entered artificial intelligence and robotics.
However, some of the most bullish Tesla investors believe the company could become worth $100 trillion, and CEO Elon Musk does not believe that number is completely out of the question, even if it sounds almost ridiculous.
To put that number into perspective, the top ten most valuable companies in the world — NVIDIA, Apple, Alphabet, Microsoft, Amazon, TSMC, Meta, Saudi Aramco, Broadcom, and Tesla — are worth roughly $26 trillion.
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Cathie Wood of ARK Invest believes the number is reasonable considering Tesla’s long-reaching industry ambitions:
“…in the world of AI, what do you have to have to win? You have to have proprietary data, and think about all the proprietary data he has, different kinds of proprietary data. Tesla, the language of the road; Neuralink, multiomics data; nobody else has that data. X, nobody else has that data either. I could see $100 trillion. I think it’s going to happen because of convergence. I think Tesla is the leading candidate [for $100 trillion] for the reason I just said.”
Musk said late last year that all of his companies seem to be “heading toward convergence,” and it’s started to come to fruition. Tesla invested in xAI, as revealed in its Q4 Earnings Shareholder Deck, and SpaceX recently acquired xAI, marking the first step in the potential for a massive umbrella of companies under Musk’s watch.
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Now that it is happening, it seems Musk is even more enthusiastic about a massive valuation that would swell to nearly four-times the value of the top ten most valuable companies in the world currently, as he said on X, the idea of a $100 trillion valuation is “not impossible.”
It’s not impossible
— Elon Musk (@elonmusk) February 6, 2026
Tesla is not just a car company. With its many projects, including the launch of Robotaxi, the progress of the Optimus robot, and its AI ambitions, it has the potential to continue gaining value at an accelerating rate.
Musk’s comments show his confidence in Tesla’s numerous projects, especially as some begin to mature and some head toward their initial stages.
Elon Musk
Tesla director pay lawsuit sees lawyer fees slashed by $100 million
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
The Delaware Supreme Court has cut more than $100 million from a legal fee award tied to a shareholder lawsuit challenging compensation paid to Tesla directors between 2017 and 2020.
The ruling leaves the case’s underlying settlement intact while significantly reducing what the plaintiffs’ attorneys will receive.
Delaware Supreme Court trims legal fees
As noted in a Bloomberg Law report, the case targeted pay granted to Tesla directors, including CEO Elon Musk, Oracle founder Larry Ellison, Kimbal Musk, and Rupert Murdoch. The Delaware Chancery Court had awarded $176 million to the plaintiffs. Tesla’s board must also return stock options and forego years worth of pay.
As per Chief Justice Collins J. Seitz Jr. in an opinion for the Delaware Supreme Court’s full five-member panel, however, the decision of the Delaware Chancery Court to award $176 million to a pension fund’s law firm “erred by including in its financial benefit analysis the intrinsic value” of options being returned by Tesla’s board.
The justices then reduced the fee award from $176 million to $70.9 million. “As we measure it, $71 million reflects a reasonable fee for counsel’s efforts and does not result in a windfall,” Chief Justice Seitz wrote.
Other settlement terms still intact
The Supreme Court upheld the settlement itself, which requires Tesla’s board to return stock and options valued at up to $735 million and to forgo three years of additional compensation worth about $184 million.
Tesla argued during oral arguments that a fee award closer to $70 million would be appropriate. Interestingly enough, back in October, Justice Karen L. Valihura noted that the $176 award was $60 million more than the Delaware judiciary’s budget from the previous year. This was quite interesting as the case was “settled midstream.”
The lawsuit was brought by a pension fund on behalf of Tesla shareholders and focused exclusively on director pay during the 2017–2020 period. The case is separate from other high-profile compensation disputes involving Elon Musk.
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