Tesla Earnings Preview: Amid Expected Earnings Drop, What New Story Can Elon Musk Tell?
$Tesla Motors(TSLA)$
Tesla's Q4 revenue is likely to continue its weak trend, following the company's earlier announcement of a significant decline in Q4 car sales. As competition intensifies in the US electric vehicle market, Musk urgently needs to present a new narrative.
The market penetration rate for new energy vehicles in the US is expected to be 7.8% in 2025, with Tesla holding a 46.2% market share. Market estimates for this year's penetration rate are around 8%, suggesting limited overall market growth. Considering the scaling up, cost reduction, and market share expansion of EVs from traditional automakers like General Motors, Tesla still faces significant pressure in car sales.
The possibility of a script flip lies in Tesla's need to iterate its autonomous driving technology by 2026 to a level good enough to be a standard configuration. Referring to previous insights, the main direction for FSD and robotaxi iteration is towards unsupervised operation. Elon Musk also confirmed at the Davos Forum on January 22 that unsupervised FSD has begun deployment in Texas. By that time, consumer mindset might once again abandon traditional automakers who have transitioned to EVs but lack similar FSD functionality.
Core Focus: What Is the Market Watching?
– Tesla's Q4 revenue is expected to be $24.75 billion, a roughly 3.71% decrease from the level in Q4 FY2024.
– EPS is expected to be around $0.352, a decline of 46.61% from Q4 FY2024.
Compared to revenue, profit pressure is greater, as rising copper and aluminum prices are likely to compress profit margins in the automotive business.
Four Things to Watch
1. Vehicle deliveries and production
Tesla previously announced that Q4 car sales declined by 15.6% year-over-year to 418,227 units. The market expects automotive revenue of $17.82 billion, compared to $19.4 billion in the same period last year.
The new entry-level Model 3, which was first launched in North America, has recently begun sales in South Korea, Thailand, and the Philippines. Its level of feature reduction is lower than that of the Model Y, and the self-driving chip hardware has not been reduced. If the new Model 3 validates demand in these smaller markets, it is likely to be launched in China later this year.
2. Energy storage segment
Tesla's energy storage division emerged as a standout performer, with Q4 installations reaching an unprecedented 14.2 GWh. This achievement contributed to a robust annual deployment of 46.7 GWh, marking a significant 49% year-over-year increase. As a result, the energy sector is rapidly evolving into a crucial contributor to Tesla's profit margins.
The market predicts revenue of $3.718 billion for Q4 2025. This corresponds to a growth rate of around 30%.
3. Services revenue
Growth in services revenue is expected to partially offset the downward trend in revenue caused by automotive sales.
The market expects services revenue to reach $3.365 billion, compared to $3.061 billion in the same period last year. However, considering that FSD (Full Self-Driving) subscriptions have surpassed 1 million users and taking into account previous growth rates, this forecast may be conservative. Actual revenue could potentially exceed $3.5 billion.
4. Guidance and strategic updates
Investors are poised to closely examine any new forecasts concerning 2026 vehicle deliveries, developments in the production of Cybercab, the production of Optimus 3, and the rollout plan of robotaxis in other cities.
Option Market Signals
Tesla's options data shows that its Put/Call ratio is 0.81, which is at a relatively low level compared to the past. Volatility analysis indicates that its implied volatility is 48.84%, higher than the historical average of 33.58%.
After the past 12 earnings reports, Tesla's stock price has fluctuated on average by 8.93%, making betting on Tesla's earnings a high-risk, high-reward investment.
In the past 12 earnings reports, Tesla's stock has risen 50% of the time following the announcement of earnings.
Summary of Risks and Opportunities
– Potential Positive Catalysts: Energy storage segment; unsupervised robotaxi
– Risks to Monitor: Delay of Optimus and other products; competition in EV area
– Valuation:
Tesla's PE ratio currently exceeds 200 times. This valuation includes expectations for the future monetization of Robotaxis and Optimus robots, although progress has been slow.
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