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Tesla Q3 Earnings in 6 Must-See Metrics

By Daniel Sparks – Oct 21, 2021 at 6:15AM

Key Points

  • Tesla's earnings soared on the heels of a 73% year-over-year increase in vehicle deliveries.
  • The automaker's profitability is benefiting from improved efficiencies at higher volumes.
  • Tesla is building a new energy-storage factory that will dwarf its previous production capacity for Megapacks.

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The electric-car maker's blazing growth continued during the period. Here's a closer look at the important takeaways from the quarter.

Expectations were high going into Tesla's (TSLA 4.73%) third-quarter earnings release -- and the company didn't disappoint. Revenue and earnings per share both came in above analysts' average forecasts, setting records for the company.

Here's a closer look at Tesla's top- and bottom-line performance, the key drivers behind those metrics, and some other important takeaways from the electric-car maker's third-quarter update on Wednesday afternoon.

Tesla Model Y interior

Model Y. Image source: Tesla.

1. Revenue jumped

Helped by a 73% year-over-year increase in vehicle deliveries, Tesla's revenue increased 57% year over year. The company's sales of its two lower-cost models -- Model 3 and Model Y -- accounted for the bulk of this growth. Combined Model 3 and Y deliveries rose 87% year over year to about 232,000. Total deliveries for the period were a record 241,391. 

2. A robust gross profit margin

Capturing how economies of scale is kicking in for Tesla, its automotive gross margin expanded from 27.7% in the year-ago quarter to 30.5%. This ultimately helped gross profit increase faster than revenue, growing 77%.

3. Adjusted earnings per share more than doubled

Tesla's scalable business model was also evident in the company's operating margin, which widened 534 basis points between the third quarter of 2020 and the third quarter of 2021, to 14.6%.

Improved operating income was "due to vehicle volume growth and cost reduction," Tesla said in its third-quarter update

Combining Tesla's strong revenue growth with its widening operating margin, the company's non-GAAP (adjusted) earnings per share increased 145% year over year to $1.86. Unadjusted earnings per share rose 433% to $1.44.

4. Over $16 billion of cash

A combination of strong free cash flow ($1.3 billion in Q3 alone) and an already significant cash position meant that Tesla was able to make net debt and finance lease repayments of $1.5 billion and still end the quarter with $16.1 billion in cash.

5. Rapid growth in energy-storage deployments

Tesla's energy-storage deployments during the quarter increased 71% year over year to 1,295 megawatt hours (or about 1.3 gigawatt hours).

But Tesla noted in its third-quarter update that this barely taps the surface of where the nascent energy business is headed, as the new Megapack factory Tesla recently broke ground on is supposed to produce 40 gigawatt hours of energy-storage capacity annually. This compares to Tesla's total deployments in the last 12 months of about 3 gigawatts.

6. Guidance for a significant increase in deliveries

Finally, Tesla reiterated guidance for deliveries to average a compound annual growth rate of 50% over "a multi-year horizon," despite the company's warnings about "ongoing supply chain related challenges," "semiconductor shortages," and "congestion at ports."

"We believe our supply chain, engineering and production teams have been dealing with these global challenges with ingenuity, agility and flexibility that is unparalleled in the automotive industry," the company said.

For Tesla to achieve its full-year guidance for more than 50% growth in deliveries this year, it will need to deliver more than 750,000 units by the end of the year. But with nearly 628,000 vehicles already delivered in 2021, this target appears to be basically in the bag.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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