Earnings Preview | Tesla's Q2 Gross Margin Expected to Bottom Out, Watch for Growth in Non-Automotive Business

Tesla will announce its second-quarter earnings after the US stock market closes on Wednesday. Analysts expect Tesla's second-quarter revenue to increase by 43% YoY to $24.3 billion, with adjusted earnings per share increasing by 6.6% to $0.81.

Tesla's stock price has risen by 128% this year, making it the third-best performing stock in the S&P 500 index.

Automotive Business

Tesla delivered over 466,000 vehicles in the second quarter, an increase of over 80% YoY, far exceeding Wall Street's expectation of 426,000 vehicles and setting a new quarterly record.

Including the first quarter, Tesla's sales in the first half of 2023 were slightly below 890,000 vehicles.

The market expects Tesla to report new record delivery numbers in the third and fourth quarters, with the market believing it can achieve its goal of selling 1.8 million vehicles in 2023.

If this goal is achieved, it would represent a growth of approximately 41% compared to the reported sales of 1.3 million vehicles in 2022. While impressive, this means that Tesla will not be able to achieve its target of annual delivery growth of around 50%.

Gross Margin at a New Low?

Other Business Revenue

Tesla's energy generation and storage business revenue exceeded $1.5 billion in the first quarter, an increase of nearly 150% YoY, accounting for 6.5% of the company's total revenue.

It is expected to continue growing as Tesla has invested heavily in developing its factories in Nevada and California.

However, investors need to start paying close attention to the company's Supercharger business. This segment also showed strong YoY growth in the first quarter, accounting for approximately 8% of total revenue.

Since then, Tesla has agreed to open its fast-charging network to non-Tesla brands. Ford Motor, General Motors, Rivian, and Volvo have all reached agreements with Tesla to allow their customers to use the Supercharger network.

Investors should watch Tesla's service sector in the coming months and years to see to what extent it will help drive revenue and profit growth.

Some Challenges

In the fiercely competitive Chinese market, Tesla's market share continues to decline and is currently around 10%.

According to Cox Automotive's report, Tesla's overall share of the US electric vehicle market declined from 62% in the first three months of this year to 59% in the second quarter. Tesla's sales increased by 8% MoM, lower than the market's 14% growth rate.

In addition, Tesla's Cybertruck production has finally begun, two years later than originally planned.

Wall Street expects Cybertruck deliveries to be less than 10,000 vehicles in 2023 and less than 100,000 vehicles in 2024. These are not very high standards, and Tesla is likely to meet these numbers.

Furthermore, Tesla's valuation has rebounded too quickly, more than doubling this year and rising nearly 50% in the past three months. It's worth noting that its price-to-earnings ratio fell to around 20 times at the beginning of this year.