Tesla reported a 16% rise in revenue to $22.4bn ($22.6bn expected), with growth driven by higher automotive sales and a sharp increase in services revenue. Operating profit more than doubled at $0.9bn.
Over the quarter, Tesla produced 408,386 vehicles and delivered 358,023, with deliveries missing expectations.
Free cash flow was $1.4bn, a positive surprise relative to expectations of a cash outflow, and net cash, including leases, was $35.5bn at the end of the quarter.
Investment is expected to ramp from now to help scale AI infrastructure, Robotaxi/Cybercab, Optimus and next-generation manufacturing capacity.
The shares were down 2.7% in out-of-hours trading.
Our view
Tesla’s latest results were solid enough on the surface, with margins holding up and free cash flow coming in stronger than expected. But dig a little deeper, and it looks more like a soft beat, with some timing benefits helping to flatter the numbers. The core auto business looks to have troughed, a positive sign, but as usual, it was the earnings call that shaped the real reaction.
Investment in Tesla’s next phase has been building for some time, and that remains firmly on track. Capex is set to ramp meaningfully from here, marking a clear shift toward scaling autonomy, AI infrastructure and new product lines. That brings both significant long-term opportunity and more immediate financial trade-offs.
On the positive side, Tesla is still making progress on autonomy. Robotaxi miles are increasing, and new cities have been added, showing the network is expanding. But the key milestone is fully unsupervised driving at scale, and here the tone was more cautious.
The rollout without human safety monitors is moving forward, but slowly. Musk’s comments suggest that pace will remain measured as the software continues to evolve, effectively pushing timelines further out. That also reduces the likelihood that unsupervised FSD will reach everyday Tesla owners in the near term.
Energy storage remains another promising growth area and continues to deliver meaningful value. It’s a lumpy business, but the long-term opportunity is clear. With global power demand rising alongside AI adoption, Tesla’s positioning here remains strong.
Elsewhere, momentum around humanoid robots looks to have softened slightly. Our read of Elon’s comments was that the Optimus 3 unveiling has effectively been delayed, and the explanation around protecting design details from competitors wasn’t overly convincing.
These long-term opportunities are the key to driving its next leg of profit growth, and ultimately what underpins Tesla’s lofty valuation. But the timing is becoming more uncertain. The financial benefits from autonomy and robotics now look unlikely to show before 2027 at the earliest. The potential remains significant, but patience is being tested.
Ramping investment plans means free cash flow is expected to turn negative for a year or two. It’s understandable if that weighs on sentiment, as execution risk increases, but putting capital to use is what investors in a growth company should want to see – we are supportive.
All in, we continue to see Tesla as one of the strongest candidates to commercialise real-world AI across autonomy and robotics. But the valuation compared to expected profits is stretched even by Tesla’s standards, and with timelines pushed out, the near-term risks have increased.
Environmental, social and governance (ESG) risk
Most of the auto industry falls into the medium-risk category in terms of ESG. Product governance, particularly around safety, and carbon emissions from products and services are key risk drivers. Business ethics, labour relations and direct carbon emissions are also contributors to ESG risk.
According to Sustainalytics, Tesla's management of ESG risks is strong.
Elon Musk’s political and extra-curricular activities are a risk to monitor. Tesla also has a high degree of key person risk, Elon Musk is core to the investment case and the premium valuation, to some extent, relies on his continued leadership. Governance concerns also include Elon Musk's past social media posts which impacted Tesla's share price. Other areas to watch include safety concerns around its autopilot technology and the management of its workforce.
The author holds shares in Tesla.
Tesla key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.