Tesla Q3 2023 Earnings: Margins Crater and Revenue Slumps as Focus Remains on Volume Growth

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Tesla has now announced its earnings for the third quarter of 2023, broadly missing consensus estimates for the top-line and bottom-line metrics.

Source: https://twitter.com/garyblack00/status/1714387837947154533

Before delving straight into Tesla’s financial performance for Q3 2023, do go over Wall Street’s consensus expectations for key metrics summarized in the above chart.

Tesla (NASDAQ: TSLA) Q2 2023 Earnings

Tesla has reported $23.35 billion in revenue for the third quarter of 2023, missing consensus expectations of $23.922 billion (as per Tesla’s IR-compiled consensus estimate).

The following snippet summarizes the EV giant’s production activities during the quarter:

Tesla’s Production Activities

Tesla missed consensus delivery expectations by around 5 percent in Q3 2023, disclosing quarterly deliveries of 435,059 units. On the bright side, Tesla’s deliveries exceeded its quarterly production by 1.06 percent, which means that the EV giant managed to reduce its elevated inventory levels for the first time in a number of sequential quarters.

As per the tabulation by Bloomberg, Tesla’s auto gross margin (ex-Regulatory Credits) was expected to print at 17.7 percent during the third quarter of 2023. For additional context, do note that this metric printed at 19.0 percent in Q1 2023 and 18.10 percent in Q2 2023. Against this backdrop, the company has now revealed that its auto gross margin (ex-RC) computed at 16.30 percent during Q3 2023. This is hardly a surprise given the deep additional price cuts that Tesla has instituted in several key markets.

The EV giant has also reported free cash flow of $848 million during the pertinent period.

Finally, Tesla has announced $0.66 in non-GAAP (adjusted) EPS, missing IR-compiled consensus expectations of $0.72.

The following snippet summarizes Tesla’s latest guidance:

Tesla Guidance

Cybertruck deliveries are expected to commence in November 2023.

At the time of publication, the EV giant’s stock is down a little over 1 percent in after-hours trading as investors digest the company’s broad-based slump against key consensus expectations.

Earnings Context:

In his latest investment note, Adam Jonas conceded that the mood among institutional investors remains overwhelmingly cautious in relation to Tesla in general and the Cybertruck in particular, where teething issues are likely to prevent an aggressive production ramp-up well into 2024. Moreover, in the absence of a dedicated Cybertruck-related tailwind, many investors believe that the EV giant will have to continue to rely on additional price cuts to “clear inventory,” as per the management’s own comments during the April earnings call. Institutional investors also remain skeptical as to whether Tesla would be able to grow its earnings at all in 2024, with the impact of the Dojo supercomputer and the EV giant’s AI/FSD-related efforts “difficult to quantify, and easy to ignore.”

Note: The post has been updated to include the correct figure for the company’s ex-RC auto gross margin.

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