Tesla narrowly beat Wall Street expectations in the second quarter of 2023, but shares began to fall after hours of trading following an earnings call that offered shareholders little reassurance surrounding Tesla’s promised Cybertruck launch and other production concerns.
Revenue for the quarter topped $24.97 billion compared with analyst predictions of $24.7 billion.
The report comes after Tesla cut costs on its most popular vehicle models and generated a huge increase in sales. Earnings were $0.91 per share compared to estimates of $0.79.
Investors were closely watching Tesla’s gross margins, monitoring whether they were negatively affected by the company’s move to cut consumer prices. Gross margin for the quarter it was at 18.2%, which is a four-year low for Tesla, but still higher than analyst expectations of 17.5%.
“Despite lower auto prices, the company was able to mitigate the expected drop in margins, showcasing Elon Musk’s ability to guide the company through both prosperous and challenging times,” said Thomas Monteiro, senior analyst at the Investing.com financial analysis site.
Tesla produced 460,211 Model 3 compact cars and Model Y sport utility vehicles, its mass-market models, compared with 345,988 in the same quarter last year and 19,489 deliveries of its premium Model S and Model X vehicles, compared with 16,411 at the same time. last year.
Tesla’s stock initially rose marginally in after-hours trading following the promising report. But investors, who have been eager for updates on Tesla’s Cybertruck model, may have been disappointed by executives’ responses about the sci-fi-inspired vehicle on the call.
The truck was announced in 2019 and has yet to hit the market. Earlier this week, Tesla posted an image on social media celebrating “the first Cybertruck built in Giga Texas!” But Musk said on the call that the company had only produced a “launch candidate” model of the Cybertruck and that the vehicle is still in the “tooling” phase. Musk reiterated that the model is on track for initial deliveries in 2023 and “high volume” distribution in 2024.
As is typical of Tesla’s earnings calls, Musk rattled off a series of lofty targets. In addition to stating that the Cybertruck would launch by the end of the year, he said he saw a path to a “five or 10-fold increase in Tesla’s valuation” over time. He promised that Tesla’s self-driving technology would be “10 times, possibly 100 times, safer than a human driver.” He also said that Tesla is in talks with a major automaker about licensing the company’s full self-driving technology. “This is a big problem,” he said in a follow-up tweet about the announcement.
Such a move would be unprecedented, as Nissan, Ford and GM partnered with Tesla to share the company’s electronic vehicle chargers last year. Musk argued that Tesla’s artificial intelligence capabilities would create fully autonomous vehicle technology that would be difficult to compete with, opening up the market for AI-focused partnerships.
With shares falling after business hours, it appears that Musk’s promises may not have convinced the participants on the call. Shareholders previously expressed concern that Musk, who also owns SpaceX, Neuralink and Twitter, is being too constrained in his leadership role. Musk announced the creation of another company this month, xAI, which he described as a “pro-humanity” artificial intelligence firm that will develop technology to integrate with both Twitter and Tesla.
AI was a big focus of the earnings call, after Tesla said in its report on Wednesday that to reach its goal of fully autonomous vehicles, it must build “four main pillars” at scale: “extremely large real-world data sets, neural network training, vehicle hardware and software.” In keeping with this goal, the company said it is beginning production of Dojo, its neural network training computer that Musk first announced in 2021. Musk said on Wednesday’s call that he anticipates Tesla will spend more than $1,000 million in the coming year at Dojo, adding to concerns about the company’s expenses and its gross margin.