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Tesla surprises with $312M profit for Q3 as Model 3 margins soar past 20%

Tesla's Fremont factory, where all Model 3s are produced. (Tesla)

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Tesla’s third-quarter earnings for 2018 saw the California-based carmaker beat Wall Street revenue estimates after posting $6.8 billion in revenue and beating earnings estimates with a GAAP profit of $312 million.

The results, which were posted in an Update Letter to investors after the closing bell on Wednesday, October 24, showed third-quarter earnings of $1.75 per share on a GAAP-basis, shattering analyst estimates of -$.19 per share. Revenue was $6.82 billion versus an estimate of $6.33 billion. The company reported an adjusted non-GAAP profit of $512M or $2.90 per share. 

Profitability

Tesla posted a profit of $312 million, attaining the ambitious target set by CEO Elon Musk earlier this year. The electric car maker went through great lengths to reach profitability, from a 9% layoff across the company back in June to a massive delivery blitz in the third quarter that was augmented by volunteer owners who helped deliver vehicles to reservation holders.

“With average weekly Model 3 production through the quarter (excluding planned shutdowns) of roughly 4,300 units per week, we achieved GAAP net income of $312 million. We also delivered on our internal cost efficiency targets, leading to GAAP Model 3 gross margin of more than 20%, which exceeded our guidance,” Tesla stated in the update letter. 

This is the company’s first profitable quarter since Q1 2013, when the company posted a minor profit. The company also saw its free cash flow rise to $739M, versus a net loss of $436M last quarter.

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Revenue

The company’s revenue for the third quarter consisted of $6.09B in automotive revenue and $399M from the energy and battery storage division. Automotive revenue saw an increase of 82% compared to the previous quarter. The energy and battery storage division saw an increase of 6.6% compared to the previous quarter. Overall, total revenue was up  70.5% compared to Q2 and up 229% year-on-year.

The drastic increase in automotive revenue was mainly driven from the company’s Model 3 sales, which rose to over 56,000 deliveries in the quarter. Tesla deployed 93 MW of energy generation and 239 MWh of energy storage products in the third quarter as well, both of which grew over the previous quarter.

Model 3

Elon Musk once noted that the Model 3 was a “bet-the-company” vehicle — a car whose success or failure would determine Tesla’s future. The challenges that Tesla faced with the Model 3 ramp are well-documented, with Elon Musk describing the ordeal as one of the most painful periods of his career. The third-quarter proved to be a breakthrough for Tesla, though, as the company was able to make headway in both the number of vehicles produced and delivered.

The Model 3 had a gross margin exceeding 20% in the quarter. Tesla continues to expect this to rise to 25%, excluding any ZEV credits.

“Model 3 mix was strong in Q3 due to the launch of AWD and Performance variants. While the average selling price will gradually decline as we introduce lower priced variants, we are not expecting this to impact profitability. Model S and X Performance mix declined roughly 4-fold since 2015, yet Model S and X gross margin (excluding ZEV credits) continued to improve by roughly 600 basis points over the same period of time. Margin growth was caused by gradual cost improvements driven by lowering labor hours per vehicle, reduced cost of raw materials, and various other cost efficiencies. We continue to target a 25% gross margin ex-ZEV credits on Model 3.” – Tesla’s Q3 Letter

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Today’s trading session ended with TSLA down 1.92% at $288.50. After-hours, the stock was trading up  8.3% to $312.45.

Tesla’s full Q3 2018 Update Letter can be accessed here.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla Board member and Airbnb co-founder loads up on TSLA ahead of robotaxi launch

Tesla CEO Elon Musk gave a nod of appreciation for the Tesla Board member’s purchase.

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(Credit: Tesla)

Tesla Board member and Airbnb Co-Founder Joe Gebbia has loaded up on TSLA stock (NASDAQ:TSLA). The Board member’s purchase comes just over a month before Tesla is expected to launch an initial robotaxi service in Austin, Texas.

Tesla CEO Elon Musk gave a nod of appreciation for the Tesla Board member in a post on social media.

The TSLA Purchase

As could be seen in a Form 4 submitted to the United States Securities and Exchange Commission (SEC) on Monday, Gebbia purchased about $1.02 million worth of TSLA stock. This was comprised of 4,000 TSLA shares at an average price of $256.308 per share.

Interestingly enough, Gebbia’s purchase represents the first time an insider has purchased TSLA stock in about five years. CEO Elon Musk, in response to a post on social media platform X about the Tesla Board member’s TSLA purchase, gave a nod of appreciation for Gebbia. “Joe rocks,” Musk wrote in his post on X.

Gebbia has served on Tesla’s Board as an independent director since 2022, and he is also a known friend of Elon Musk. He even joined the Trump Administration’s Department of Government Efficiency (DOGE) to help the government optimize its processes.

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Just a Few Weeks Before Robotaxi

The timing of Gebbia’s TSLA stock purchase is quite interesting as the company is expected to launch a dedicated roboatxi service this June in Austin. A recent report from Insider, citing sources reportedly familiar with the matter, claimed that Tesla currently has 300 test operators driving robotaxis around Austin city streets. The publication’s sources also noted that Tesla has an internal deadline of June 1 for the robotaxi service’s rollout, but even a launch near the end of the month would be impressive.

During the Q1 2025 earnings call, Elon Musk explained that the robotaxi service that would be launched in June will feature autonomous rides in Model Y units. He also noted that the robotaxi service would see an expansion to other cities by the end of 2025. “The Teslas that will be fully autonomous in June in Austin are probably Model Ys. So, that is currently on track to be able to do paid rides fully autonomously in Austin in June and then to be in many other cities in the US by the end of this year,” Musk stated. 

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Investor's Corner

Tesla hints at ‘Model 2’ & next-gen EV designs

Tesla’s Q1 2025 update confirms new models this year, with production tied to existing factory lines. Could it be time for the Model 2 debut?

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(Credit: Tesla)

During its Q1 2025 earnings call, Tesla executives hinted at the much-rumored “Model 2” and other next-gen EV designs.

Tesla slightly addressed whether or not it will be pushing forward with the debut of new models later this year in its latest earnings call. The company’s product development executive, Lars Moravy, shared some details about Tesla’s design process and the upcoming affordable models.

“We’re still planning to release models this year. As with all launches, we’re working through, like, the last minute issues that pop up. We’re knocking them down one by one. At this point, I would say that the ramp might be a little slower than we had hoped initially…But there’s nothing that’s blocking us from starting production within the next, within the timeline laid out in the opening remarks.

“And I will say it’s important to emphasize that, as we’ve said all along, the full utilization of our factories is the primary goal for these new products. And so the flexibility of what we can do within the form factor and, you know, the design of it is really limited to what we can do on our existing lines rather than building new ones. But we’ve been targeting the low cost of ownership. Monthly payment is the biggest differentiator for our vehicles, and that’s why we’re focused on bringing these new models with the, you know, the lowest price, to the market, within the constraints I just highlighted.”

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In January, Tesla’s Chief Financial Officer Vaibhav Taneja teased several new product introductions for this year. There is at least one product that most Tesla supporters and investors are hoping to see: the company’s affordable vehicles, which have been dubbed by the EV community as the “Model 2” or “Model Q.”

Before Tesla’s Robotaxi event last year, many speculated that the company would also unveil its affordable next-gen vehicle. Gene Munster from Deepwater had expected Tesla to release a stripped-down version of the Model 3 as its affordable vehicle during the Robotaxi event. In the end, Tesla unveiled its Robotaxi vehicle and its Robovan design.

It’s been a while since the Robotaxi event, and Tesla has kept mum about its affordable vehicle. Considering its Q1 2025 performance, TSLA investors look forward to catalysts that could boost the stock.

The “Model 2” has been labeled a potential catalyst for Tesla. As such, TSLA investors and supporters have been itching for news about the new affordable vehicle. The main questions surrounding the “Model 2” revolve around its design and price. Based on Moravy’s statement, the “Model 2’s” design will heavily depend on Tesla’s current assembly lines and supply chain structures.

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Tesla regains Piper Sandler’s confidence with Robotaxi plans & Q1 Results

Piper Sandler says Tesla delivered the best-case scenario for bulls. $TSLA has catalysts ahead to silence the bears.

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tesla-model-y-delivery
(Credit: Tesla)

Tesla gained Piper Sandler analyst Alexander Potter’s confidence following its Q1 2025 earnings call. Piper Sandler reaffirmed its Overweight rating and $400 TSLA price target, signaling optimism for the company’s robotaxi and affordable vehicle launches expected this year. The firm’s stance reflects Tesla’s resilience amid market challenges.

Despite expectations of weak Q1 financials, Tesla’s stock edged up in after-hours trading, defying skepticism. Piper Sandler’s Alexander Potter noted that the results met the hopes of Tesla supporters, particularly as the company held firm on its timelines. Potter emphasized that anticipation for robotaxi details and new vehicle launches should keep critics at bay, supporting the $400 target.

“In our preview last week, we predicted that (at best) Q1 would be a non-event. With the stock trading up slightly in the after-hours session, it appears our best-case scenario has materialized. Considering generally weak Q1 financials, we think this is the best result that TSLA bulls could’ve reasonably hoped for.

“In our view, the most important Q1 takeaway is this: Tesla didn’t hedge expectations re: launching Robotaxis or lower-priced vehicles in 1H25. With <2 months until the end of June, investors can look forward to some interesting catalysts in the weeks ahead. In our view, this alone should be enough to keep the bears at bay, at least until we have a better idea re: the details of Tesla’s new products, as well as the scale/scope of the Robotaxi launch,” wrote Potter.

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Wedbush Securities’ Dan Ives, a longtime TSLA bull, echoed Potter’s optimism for Tesla. Ives raised his price target for Tesla stock from $315 to $350 with a BUY rating. His Tesla upgrade came after Elon Musk’s announcement during the Q1 earnings call that he would reduce his involvement with DOGE, signaling a sharper focus on Tesla.

Tesla’s steady Q1 performance and unwavering commitment to its 2025 roadmap, including the Robotaxi launch and lower-priced models, bolster investor confidence. Piper Sandler’s analysis underscores Tesla’s ability to navigate a competitive electric vehicle market while advancing its technological edge. The upcoming Robotaxi launch and affordable vehicle introductions are pivotal, with analysts expecting these initiatives to drive stock value through 2025.

As Tesla prepares for these milestones, its stock movement reflects market trust in Musk’s vision. With Piper Sandler and Wedbush reaffirming bullish outlooks, Tesla’s strategic moves will remain under close scrutiny, positioning the company to capitalize on its innovation pipeline in a dynamic industry landscape.

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