Tesla's first-quarter financial report fell short of expectations: Profit plummeted by 40%, and revenue from the automotive business decreased by 20%

After the market closed on Tuesday, Tesla released a first-quarter report with performance completely worse than expected.

Due to the sharp drop in vehicle deliveries, the company's core financial indicators such as revenue and profit were all significantly lower than expected.

Tesla "blamed" the decline in performance on the "uncertainty" of government trade policies and did not mention the impact brought by CEO Elon Musk's "joining the cabinet".

In the financial report, unlike last quarter when it expected that vehicle deliveries this year would return to growth after last year's decline, it said that the second-quarter financial report would update this year's guidance.

However, Tesla also had some bright spots in the first quarter.

The energy storage business still grew strongly, with the installed capacity of deployed energy storage maintaining triple-digit growth, and it was expected that the demand for energy storage would increase. Tesla also reaffirmed its plan to produce new vehicles in the first half of the year, including low-priced models.

After the financial report was released, influenced by remarks from US President Trump after the market closed, such as "having no intention of firing Jerome Powell" which eased market sentiment, and Elon Musk's statement during the financial report briefing that his time spent in the "Department of Government Efficiency" would be significantly reduced in May, Tesla's share price once rose by more than 5% after hours.

The Dismal Financial Report

The financial report showed that Tesla only achieved revenue of $19.335 billion in the first quarter of this year, while the market expectation was $21.348 billion. Compared with previous performance, the company's revenue in the first quarter of last year was $21.3 billion, and in the fourth quarter of last year, it was $25.7 billion. And the adjusted net profit in the first quarter was $934 million, a year-on-year decrease of 39%, and in the fourth quarter, it decreased by 71% year-on-year.

The core reason dragging down performance was the sharp drop in vehicle sales. Previous delivery data showed that Tesla's total deliveries in the first quarter were 336,681 vehicles, a year-on-year decrease of 13%, marking the worst quarterly performance since 2022.

Affected by this, the revenue from the automotive business was only $13.967 billion, a year-on-year decrease of 20%. Even though the energy and energy storage business achieved a revenue growth rate of 67% ($2.73 billion), it still could not change the overall trend of the financial report.

At the same time, due to the investment in R&D projects such as AI, the company's operating expenses increased instead of decreasing, resulting in a sharp year-on-year drop of 66% in operating profit to $399 million. The operating profit margin was only 2.1%, a year-on-year decrease of 343 basis points. Eventually, the adjusted earnings per share were only $0.27, a year-on-year decrease of 40%, while the market expectation was $0.43.

In other words, without the $595 million obtained from selling regulatory credits (carbon emission credits) in the first quarter, Tesla would have presented a loss-making financial report.

The Installed Capacity of Energy Storage Deployment Grew by 154% in the First Quarter, and Musk's Remarks Had Many Highlights

After reading it, I think the only bright spots in this financial report are Tesla's energy storage business and Elon Musk's remarks afterwards.

The revenue growth of Tesla's energy storage business in the first quarter slowed down compared with the fourth quarter, but the double-digit growth rate partially offset the decline in automotive revenue, ensuring that the company's total revenue decline did not exceed 10%.

In the fourth quarter of last year, Tesla deployed a record-high 11,000 megawatt-hours (GWh) of battery energy storage products, with the installed capacity increasing by 243% year-on-year. In the first quarter, Tesla's installed capacity of battery energy storage deployment reached 10,400 GWh, close to the record set in the fourth quarter, with a year-on-year growth of 154%.

Although the growth rate slowed down compared with the fourth quarter, it was still higher than the annual growth rate of 113% last year.

Tesla said that the installed capacity of the Powerwall product in the energy storage business set a new quarterly record for the fourth consecutive quarter. The installed capacity of Powerwall in the first quarter exceeded 1 GWh for the first time in the company's history, and the supply continued to be limited.

And during the earnings call, Elon Musk said that he expected millions of Tesla vehicles to achieve full self-driving by the second half of next year.

He also expected that thousands of Optimus robots would be working in Tesla factories by the end of this year, and the company also plans to expand the scale of Optimus. He was confident in predicting that by 2029 or 2030, the annual production of Optimus robots would reach one million units.

In addition, he said the unmanned and fully autonomous driving function for personal use will be launched before the end of this year.

Most importantly, Musk promised that the time he invests in the Department of Government Efficiency is expected to be significantly reduced in May, and he will devote more time to Tesla.

I think despite the dismal financial report, these remarks by Musk undoubtedly enhanced market confidence, especially his promise to devote more time to Tesla.

Tesla's Future

The market also pays great attention to how Tesla evaluates the impact of "Trump's tariffs".

The company stated in the financial report that the rapidly changing trade policies have an adverse impact on the global supply chain and Tesla's cost structure, and the uncertainties in the automotive and energy markets are increasing.

This dynamic, coupled with changes in political sentiment, may have an important impact on the demand for Tesla's products, especially in the short term.

Tesla also disclosed that the current tariff situation has a greater impact on the energy business compared to the automotive business.

I think this sentence refers to Tesla's large-scale energy storage battery Megapack, which uses lithium iron phosphate batteries imported from China. In comparison, all Tesla cars sold in the United States are assembled locally, but they will also be affected by import tariffs on components.

Tesla said that it is currently difficult to measure the impact of changes in global trade policies on the supply chain, cost structure, and demand, and the company will re-examine the guidance expectations for 2025 in the second-quarter financial report.

Since Trump took office, violent and destructive acts against Tesla have occurred frequently. Charging stations have been set on fire, showrooms have been shot at, car owners have been humiliated, and there has also been a global "Bring Down Tesla" protest movement, all of which are directed at Elon Musk.

This has also led to a sharp drop in Tesla's sales in many European countries.

Among European countries, except for the UK, Tesla's sales in other countries have all dropped sharply. According to data released by Statista, the declines in Germany, Denmark, and Sweden exceeded 50%, and the decline in the Netherlands was also close to 50%.

Is It Still Worth Buying?

Although Tesla released a dismal financial report, judging from the rise in its share price after hours, we can see that the market actually doesn't care, and I feel the same way.

I think the valuation of Tesla's car sales business is almost $1 trillion.

The increase in market value brought to Tesla by the car sales business mainly stems from its innovations in electricity utilization and battery technology. At the same time, by building a software ecosystem, charging network, and other measures, it has created new value growth points.

But in fact, it is at most around $1 trillion, and it is basically impossible to increase further.

However, Tesla is not just a simple car company. In the future, the commercial value brought by robotaxis and Optimus will be even greater, so they will occupy a more important position in Tesla's value.

The financial report  disclosed that Robotaxi will launch a pilot program in Austin, the United States in June this year, and this year, a pilot production of Optimus robots will also be carried out at the Fremont factory, and more robots performing actual work will be deployed in the factory. The company also attached photos of the Optimus trial production line in the financial report.

Elon Musk once said that robotaxis can reduce the travel cost to $0.25 per mile, while the current cost of taxis and ride-hailing services is $2 per mile or higher.

The current travel cost of taxis in Western countries is between $2 and $4 per mile. In the existing travel market, the market value of the ride-hailing company Uber is $150 billion. There should be no suspense for Tesla's robotaxis to compete with it. Coupled with the multiple expansion of the market scale, the increase in market value that this business can bring to Tesla is conservatively estimated to be $5 trillion.

Musk also said in the financial report that by 2030, the annual production of Optimus robots will reach one million units. I think the penetration rate of this thing in human society will be very high in the future.

Since there are no similar companies with large-scale applications, it is difficult to estimate the specific profit, but I don't think it will be lower than that of robotaxis.

And Let's take a look at Tesla's current weekly K-line chart.