Tesla Stock Rises Sharply After Q3 Earnings Beat and Upbeat 2025 Guidance

Tesla stock (NYSE: TSLA) is trading sharply higher in early US price action today after the company reported better-than-expected Q3 earnings and provided upbeat guidance for the next year. Today’s price action is a welcome break for investors as the stock has looked weak in October after its “We, Robot” day and Q3 deliveries failed to impress.

The company reported revenues of $25.2 billion in the quarter which was 8% higher YoY but slightly short of the $25.4 billion that analysts were expecting. Tesla’s automotive revenues rose 2% YoY to $20.16 billion. The Energy segment’s revenues rose 52% YoY to $2.37 billion. Notably, the contribution of Tesla’s Energy segment has increased gradually as while the core automotive business has sagged, its energy sales have been buoyant.

Tesla Reported Strong Growth in Energy Revenues

The company’s Services and Other revenues also rose an impressive 29% to $27.9 billion. In its shareholder deck, Tesla said, “We also recognized our second-highest quarter of regulatory credit revenues as other OEMs are still behind on meeting emissions requirements.”

Legacy automakers have scaled back their once ambitious EV (electric vehicle) plans amid tepid demand and mounting losses and therefore have to spend money on buying regulatory credits from EV companies like Tesla.

Tesla Reported Better Than Expected Profits

Thanks to the $739 million revenue from selling automotive credits, Tesla was able to beat its Q3 EPS estimates quite easily and its adjusted EPS of 72 cents was well ahead of the 58 cents that analysts were expecting. While Tesla does not provide the breakdown for sales of its Cybertruck, it said that the pickup model achieved a positive gross margin in the quarter. It also said that Cybertruck is now the third best-selling electric model in the US – the first two on the list are its Model Y and Model 3 respectively.

Among others, the Cybertruck competes with Ford’s F-150 whose ICE (internal combustion engine) model has been America’s best-selling pickup for decades. Rivian’s R1T also competes in the electric pickup market.

Tesla also reassured markets about its 2024 delivery outlook and emphasized, “Despite ongoing macroeconomic conditions, we expect to achieve slight growth in vehicle deliveries in 2024.” The EV maker’s deliveries fell YoY in the first two quarters of the year and while they did rise in Q3, its cumulative deliveries in the first nine months of the year are still lower than the corresponding period last year.

Tesla Expects Deliveries to Rise Sharply in 2025

During the earnings call, Musk was bullish on the 2025 delivery outlook and said, “Something like 20% to 30% growth next year is my best guess.” While that guidance at the midpoint is half of the 50% long-term delivery guidance that Musk once touted, it’s nonetheless encouraging considering the current state of the EV industry.

The billionaire was also quite upbeat on its Optimus humanoid and said, “I feel confident in saying that we have the most advanced humanoid robot by a long shot. And we’re moreover the only company that really has all of the ingredients necessary to scale humanoid robots.”

Tesla showcased the abilities of Optimus at the “We, Robot” event earlier this month. While the humanoid impressed visitors with all the tasks it could do, it wasn’t all technology but these were being remotely controlled.

How did Analysts React to TSLA’s Q3 Earnings?

Wall Street analysts reacted to Tesla’s earnings on partisan lines even as the overall tone was of cautious optimism.

Morgan Stanley analyst Adam Jonas who is a long-standing TSLA bull maintained his “overweight” rating on the stock while assigning a target price of $310. “One of the strongest Tesla prints in a while could mark a ‘bottom’ in auto earnings expectations (and sentiment?),” said Jonas in his statement.

He added, “More specific comments about ‘slight’ FY24 delivery growth and next gen/lower cost new product intros from 1H25 help to address investor concerns around top line growth.”

Barclays analyst Dan Levy who has a “neutral” rating and $220 target price on Tesla said, “Tesla posted a solid 3Q beat, reflecting upside on margin. While we believe the 3Q print “doesn’t change the underlying debates around AI/AV strategy or the question of 2025 volume/potential for ‘Model 2.5,’ nevertheless it should be deemed a positive as it reflects positive fundamentals for now, with estimates rightsized and likely past the worst on margins.”

Goldman analyst Mark Delaney maintained his “neutral” rating on TSLA. In his note, Delaney said, “We believe key debates will include whether Tesla can meet its FSD [full self-driving] performance and vehicle delivery growth targets for 2025, and also the sustainability of margins.”

Wells Fargo Was Not Impressed by TSLA’s Earnings

Wells Fargo analyst Colin Langan wasn’t however impressed with Tesla’s Q3 earnings and maintained his “underweight” rating on the stock. “Trading at 95x 2025 Street EPS, robotaxi is clearly driving TSLA mkt premium. After attending We, Robot Day, we still believe these promises won’t be delivered on until post-2030.”

He added, “The lack of specifics makes us cautious & will require a long & unknown regulatory approval process. Furthermore, reports indicate the Robots were tele-opped.”

The Tesla Vs. xAI Question

Musk has often faced allegations of conflict of interest with the other companies that he runs. His AI startup xAI has especially been in reports after reports earlier this year suggested that he diverted some AI chips earmarked for Tesla to xAI.

The question of the relationship between Tesla and xAI popped up during Tesla’s Q3 earnings call. Responding to that question, Musk said, “I should say that xAI has been helpful to Tesla AI quite a few times in terms of things like scaling it, bought it, like training, just even like recently in the last week or so, improvements in training, where if you’re doing a big training one and it fails, be able to continue training and is to recover from a training on has been pretty helpful.”

He added, “But there are different problems. xAI actually is working on artificial general intelligence or artificial super intelligence. Tesla’s autonomous cars and autonomous robots.”

Meanwhile TSLA stock is leading the S&P 500 Index higher today as the index is finally in the green for the first time this week.