TSLA Q1 Earnings Preview: Can Energy Storage Offset Weak EV Sales?

Electric vehicle and tech giant Tesla TSLA is set to release first-quarter 2025 results on April 22, after the closing bell. The results will primarily center around the company’s vehicle deliveries and profit margins. While first-quarter deliveries marked the weakest numbers in more than two years, one segment that is thriving is its Energy Storage business. But will that be able to cushion the struggling core EV business?

TSLA missed earnings estimates in three of the trailing four quarters and surpassed in one, the average surprise being 0.8%. Before we delve into the factors that are set to shape its upcoming results, here’s a snapshot of its fourth-quarter 2024 earnings report.

TSLA Q4 Highlights

Tesla’s fourth-quarter production totaled 459,445 units (436,718 Model 3/Y and 22,727 other models), declining 7% year over year and missing our estimate of 540,826 units. The company delivered 495,570 vehicles, which increased 2% year over year but lagged our estimate of 517,043 units. The Model 3/Y registered deliveries of 471,930 vehicles, marking year-over-year growth of 2% but falling short of our expectations by 19,221 units.

Total automotive revenues of $19.78 billion were down 8% year over year and lagged our estimate of $22.56 billion. Automotive gross margin came in at 15.9%, down from 18.3% reported in fourth-quarter 2023. It also missed our forecast of 18.4% amid lower-than-expected revenues.

Energy Generation and Storage revenues came in at $3.06 billion in fourth-quarter 2024, rocketing 113% year over year and breezing past our estimate of $2.6 billion. Notably, energy storage deployments came in at 11 GWh, exceeding our projection of 9.2 GWh.

Tesla had cash/cash equivalents/investments of $36.56 billion as of Dec. 31, 2024. Long-term debt and finance leases, net of the current portion, totaled $5.7 billion.

Weak Deliveries to Ail, Energy Storage Growth to Aid

Tesla delivered 336,681 cars in the first quarter. Sales were down from 495,570 units in the fourth quarter of 2024 and 386,810 in the first quarter of last year. The deliveries missed our estimate of 409,584 units. A total of 323,800 Model 3/Y vehicles were sold (compared with our projection of 389,255 units) along with 12,881 other models (vs. our estimate of 20,329 units).

Sales of Tesla vehicles declined in all key regions like China, the United States and Europe. One key factor behind Tesla’s soft first-quarter 2025 deliveries was the temporary production disruption caused by factory retooling to accommodate the updated Model Y SUV. Additionally, growing public backlash against CEO Elon Musk’s political activity may have weighed on the brand’s image and contributed to weaker demand.

Weaker-than-expected volumes are likely to weigh on revenues. As it is, the company is offering generous incentives amid the price war, which will further limit revenues and margins. We expect gross margins from automotive sales to fall 200 basis points year over year to 15.8% in the to-be-reported quarter. Meanwhile, Tesla has been making progress in reducing its COGS, which might offset the weakness in demand and the effect of pricing pressure.

The bright spot for the company is its Energy Generation and Storage business. This segment stands out as Tesla's most lucrative, boasting the highest margins. In 2024, deployments soared 113% year over year.  In the first quarter of 2025, Tesla deployed 10.4 GWh of energy storage — a massive 156% year-over-year increase. We expect revenues from the segment to jump 90% year over year.

Having said that, this still accounts for just over 12% of the company’s overall revenues, while the core automotive unit constitutes 75% of the total revenues. So, even though the energy storage business is Tesla’s fastest-growing unit, it is not big enough to offset the sluggish performance of the automotive segment.

Overall Earnings & Revenue Projections

Our proven model does not conclusively predict an earnings beat for Tesla as it doesn’t have the right combination of a positive Earnings ESP and a favorable Zacks Rank. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company has an Earnings ESP of -11.69% and carries a Zacks Rank #5 (Strong Sell).

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is pegged at 45 cents. The consensus mark for EPS has moved south by 8 cents over the past 30 days. The Zacks Consensus Estimate of $21.85 billion for sales indicates a 3% rise on a year-over-year basis.

(See the Zacks Earnings Calendar to stay ahead of market-making news.)

Stocks With Favorable Combination

While an earnings beat looks uncertain for Tesla, here are a few players from the auto space that, per our model, have the correct ingredients to post an earnings beat this time.

QuantumScape QS will release first-quarter 2025 results on April 23. The company has an Earnings ESP of +8.07% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for QuantumScape’s to-be-reported quarter’s loss is pegged at 21 cents per share. QuantumScape surpassed earnings estimates in one of the trailing four quarters and missed on the other three occasions, with the average negative surprise being 7%.

Aptiv PLC APTV will release first-quarter 2025 results on May 1. The company has an Earnings ESP of +12.45% and a Zacks Rank #3.

The Zacks Consensus Estimate for Aptiv’s to-be-reported quarter’s earnings and revenues is pegged at $1.53 per share and $4.77 billion, respectively. Aptiv surpassed earnings estimates in each of the trailing four quarters, with the average surprise being 10%.

BorgWarner BWA will release first-quarter 2025 results on May 7. The company has an Earnings ESP of +5.24% and a Zacks Rank #3.

The Zacks Consensus Estimate for BorgWarner’s to-be-reported quarter’s earnings and revenues is pegged at 97 cents per share and $3.38 billion, respectively. BorgWarner surpassed earnings estimates in each of the trailing four quarters, the average surprise being 17%.

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This article originally published on Zacks Investment Research (zacks.com).

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