Tesla Releases First Quarter Earnings

Zacks Rank #4 (Sell) stock Tesla (TSLA) reported Q1 earnings Tuesday after the market close. Thus far in 2025, Tesla shares have sliced lower by nearly 40% amid tariff concerns, a slowing electric vehicle market, macroeconomic weakness, and political backlash. The earnings details are as follows:

·       Earnings Per Share (EPS) of $0.27 missed Wall Street estimates of $0.43

·       Revenue of $19.3B, missed Wall Street estimates of $21.11B (-9% year-over-year)]

·       Gross margin of 16.3%

In early after-hours trading, Tesla shares fluctuated and were mostly unchanged (though the stock historically tends to move based on CEO Elon Musk’s comments). Before earnings, the options market implied a move of ~9%. The lower volatility is a welcome sign for TSLA investors who have had to endure extreme fluctuations. Overall, the lack of a market reaction is telling. As mentioned earlier, Tesla and its embattled leader, Elon Musk, have had the proverbial “kitchen sink” thrown at it. Though the numbers are poor compared to Tesla’s long-term growth, I expected worse numbers.

Tesla Will Revisit Guidance in Q2 Update

Usually, when a company suspends guidance, it is a bearish catalyst that crushes shares. However, with the current global tariff chaos and uncertainty with Tesla’s China business, investors are likely willing to give the company some leeway. Further, Tesla does not typically provide precise guidance; instead, it provides high-level, vague guidance.

Tesla Remains on Track for Robotaxi Pilot Launch

Before the EPS release, whether Tesla would launch its pilot Robotaxi program in Austin, Texas, this summer was one of the biggest questions on investors’ minds. With Alphabet’s (GOOGL) Waymo dominating the small but growing autonomous ride-hailing market, time is not on Tesla’s side. In addition, Musk and Tesla are not known for their punctuality and many Wall Street analysts surmised that tariffs and other macroeconomic factors would delay the launch. Bulls can breathe a collective sigh of relief knowing that the long-awaited and potentially game-changing business is finally getting off the ground.

Gross Margins Consistent with Q4

One of the most significant surprises is that Tesla’s gross margins of 16.3% were largely in line with Q4 margins.

Plans for New Tesla Models on Track

Despite the many distractions, Tesla announced that it is on track to begin working on new vehicle models in the first half of 2025, including the long-anticipated, very inexpensive model.

Tesla’s Energy Business is on Fire

Tesla’s energy storage business was the star of the quarter, growing 67% year-over-year. Energy has been the most consistent and strongest growing side of the business.

Bottom Line

Tesla’s first-quarter earnings for 2025 revealed a significant miss on both EPS and revenue targets, coupled with a steady gross margin. Despite the negative headwinds of tariff concerns, a cooling EV market, and macroeconomic pressures, the market’s muted reaction to results suggests a degree of baked-in pessimism.

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This article originally published on Zacks Investment Research (zacks.com).

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