Please ensure Javascript is enabled for purposes of website accessibility

Tesla's Q3 Earnings: Profit Blows Past Estimates

By Daniel Sparks - Updated Oct 24, 2019 at 8:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The electric vehicle maker's business may have finally become self-funding.

Following a worse-than-expected second quarter this summer, when Tesla (TSLA -6.42%) missed both top- and bottom-line forecasts, investors were watching the automaker's third-quarter update closely on Wednesday afternoon. Specifically, they were looking to see if higher Model 3 deliveries in Q3 compared with Q2 would help or hurt the company's financials.

Tesla delivered -- and then some. Its bottom line swung from a loss in the second quarter of 2019 to a meaningful profit in Q3 as its automotive gross margin strengthened sequentially. In addition, Tesla's free cash flow was far ahead of what analysts were expecting.

Shares are soaring, up more than 20% in after-hours trading on Wednesday as of 6:10 p.m. EDT.

Tesla Model S, Model 3, and Model X

Tesla's Model S, Model 3, and Model X. Image source: Tesla.

Tesla's Q3 results

Third-quarter revenue came in at $6.3 billion, in line with analysts' forecasts but down from revenue of $6.8 billion in the year-ago quarter. Revenue fell despite a 16% year-over-year increase in vehicle deliveries. The decline was primarily due to the introduction of a leasing option for the Model 3. About 6,500 of the cars were subject to lease accounting during the quarter, up from zero in the year-ago period.


Q3 2019

Q3 2018

Change (Decline)

Vehicle deliveries




Net income

$143 million

$312 million


Non-GAAP (adjusted) EPS




GAAP = generally accepted accounting principles. EPS = earnings per share. Data source: Tesla quarterly shareholder letters.

Tesla's net income for the period was $143 million, down from $312 million in the year-ago period. Non-GAAP net income in the third quarter of 2019 was $342 million, down from $516 million in the third quarter of 2018.

Despite net income falling on a year-over-year basis, the period's profitability took The Street by surprise. Analysts feared outsize growth in the company's lowest-cost vehicle -- the Model 3 -- would weigh on earnings. Model 3 deliveries accounted for 82% of the quarter's deliveries, up from 67% in the third quarter of 2018. On average, analysts were expecting Tesla to report an adjusted loss per share of $0.42. Yet non-GAAP earnings per share for the period were $1.86.


Capturing Tesla's recent operational progress, non-GAAP earnings per share swung from a loss of $1.12 in the second quarter of 2019 to a profit of $1.86. In addition, Tesla's automotive gross margin also improved nicely on a sequential basis, rising from 18.9% in Q2 to 22.8%. Even when excluding the impact of regulatory credits, Tesla's automotive margin improved by 366 basis points.

Free cash flow for the period was $371 million, crushing a consensus analyst estimate for free cash flow of $32 million.

Looking ahead

Going into the year, Tesla said it expected to deliver between 360,000 and 400,00 vehicles, representing 45% to 65% growth. Many investors had doubts as to whether this target was achievable. Yet with just over two months left in the year, the company says it's on track to exceed 360,000 deliveries in 2019.

Importantly, Tesla reiterated that it continues to believe it has grown its business to the point of being self-funding. While management says profits and free cash flow could suffer any time Tesla is bringing new products to market and is ramping up production of those products, it expects to be profitable for the most part from here on out.

Regarding future products, the company said it's expecting to launch its Model Y this coming summer, with limited production of its Tesla Semi coming sometime next year as well.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$663.90 (-6.42%) $-45.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.