Tesla (TSLA 3.25%) stock is down 4.3% in after-hours trading on Wednesday as of 7:04 p.m. ET, following the electric vehicle pioneer's release of its second-quarter 2023 results.
The stock's relatively modest decline is likely attributable to investors finding nearly an equal measure of positives as concerns in the report. In the plus column, Tesla exceeded Wall Street's expectations for both revenue and adjusted earnings, with the bottom-line beat a quite solid one. On the other hand, as with last quarter, investors are likely uneasy about the continued downward pressure on key profitability margins due to the company's ongoing vehicle price cuts.
The following is an overview of Tesla's second quarter, centered on seven key metrics.
1. Revenue jumped 47%
Quarterly revenue grew 47% year over year to $24.9 billion. This result surpassed the $24.5 billion Wall Street consensus estimate.
Revenue growth was driven by increased vehicle deliveries and growth in other parts of the business, offset by lower vehicle average selling price (ASP) and foreign currency headwinds.
Segment year-over-year revenue performance was as follows:
- Automotive segment revenue grew 46% to $21.27 billion.
- Energy generation and storage revenue soared 74% to $1.51 billion. Growth was driven by a 222% increase in energy storage capacity deployments to 3.7 gigawatt hours (GWh). Solar power deployments dropped 38% to 66 megawatts (MW), which the company attributed as "predominantly due to a high interest rate environment that is causing the postponement of solar purchasing industrywide."
- Services and other revenue rose 47% to a record $2.15 billion. Though the company didn't explicitly state the growth drivers in its update, it seems safe to assume that they were an increase in paid use of its Superchargers, along with used car and part sales.
2. Vehicle production and deliveries soared 86% and 83%, respectively
In Q2, Tesla produced 479,700 vehicles (more than 460,000 Model 3 and Y units and nearly 20,000 Model S and X units), up 86% from the year-ago period. The company also delivered 466,140 vehicles (almost 447,000 Model 3/Y and more than 19,000 Model S/X), up 83% year over year. As I reported at the time, this delivery number cruised by Wall Street's consensus estimate of about 448,600.
3. Auto segment gross margin was 19.2%
In Q2, the automotive segment's gross margin (gross profit divided by revenue) based on generally accepted accounting principles (GAAP) was 19.2%. While this is still a strong result relative to the auto industry, it's down both year over year and sequentially. This number was 27.9% in the year-ago period and 21.1% last quarter. These declines are due to Tesla's ongoing vehicle price cuts.
NASDAQ: TSLA
Key Data Points
4. Operating income edged down 3%
The quarter's operating income slipped 3% year over year to $2.4 billion. Operating margin (operating income divided by revenue) was 9.6%, lower than the 14.6% in the year-ago period and down from the 11.4% from the prior quarter.
5. Adjusted EPS grew 20%
In Q2, GAAP net income was $2.7 billion, or $0.78 per share, up 20% from the year-ago period. Adjusted for one-time items, net income landed at $3.1 billion, or $0.91 per share, which was also an increase of 20% year over year. This result surpassed the $0.82 adjusted earnings per share (EPS) analysts had expected.
6. Operating cash flow rose 30%
The quarter's cash generated from operations rose 30% year over year to $3.1 billion. Free cash flow surged 62% to $1.0 billion. Tesla ended the quarter with $23.1 billion in cash, cash equivalents, and short-term investments, up from $22.4 billion last quarter.
7. Supercharger stations increased by 33%
Tesla continued building out its global network of Supercharger stations. It ended the quarter with 5,265 stations, up 33% from the year-ago period. Supercharger connectors grew 33% year over year to 48,082.
A solid quarter despite the continued slide in margins
Investors were likely pleasantly surprised at the magnitude of the earnings beat but also disappointed at the magnitude of the declines in key profitability margins, such as the auto gross margin and operating margin.
That said, with Tesla's 20% year-over-year increase in adjusted profits, its quarter was still solid.
