A Surprising Takeaway From Tesla's Disappointing Earnings Report and What It Means for Bitcoin

Tesla (NASDAQ: TSLA) has had a tough start to the year. Its stock is down almost 30% year to date, and disappointing is, frankly, a polite word to use about its first-quarter results. Its revenue and earnings per share missed analyst expectations, and its automotive revenue fell 20% year on year.

But there's been plenty of coverage of Tesla's troubles. If you're a crypto investor, there's a less-reported figure to note in Tesla's recent earnings: Its crypto holdings are currently worth about $1.1 billion. It holds 11,509 Bitcoins (CRYPTO: BTC) and it hasn't sold any since 2022.

The balance sheet value of its crypto stash shot up dramatically at the end of last year because of changes in accounting rules. And that rule change is good for cryptocurrency adoption.

New accounting rules could help Bitcoin

The Financial Accounting Standards Board (FASB) issued new guidance in 2023 because investors complained that the old rules distorted the value of digital asset holdings. As of December 2024, public companies have to report the fair value of any crypto assets they hold in each reporting period.

That's a big change. The old rule applied something called historical cost accounting -- a very conservative way of attributing value -- to digital assets. This handicapped companies that held crypto. It meant public companies had to list crypto holdings on their balance sheets at their lowest price, unless they sold them. The value of any crypto holdings would initially reflect the purchase price and then get written down if prices fell. But the value could only go down -- subsequent recoveries didn't make any difference.

For example, Tesla bought its Bitcoin in early 2021 at about $30,000 per coin. At the end of 2022, Bitcoin's price fell below $16,000. It was stuck at $15,987 on Tesla's balance sheets for quite some time. Tesla listed its Bitcoin stash at a steady $184 million in every quarterly report from December 2022 to December 2024. The price rose considerably, but only that low point showed in Tesla's earnings.

That changed for Q4 2024 when Tesla applied the new rules and the value of its coins jumped to more than $1 billion. It recorded a $600 million gain on its balance sheet -- almost a quarter of its $2.3 billion net income for the quarter.

Image source: Getty Images.

Tesla and Bitcoin

Tesla and Bitcoin? It's complicated. In early 2021, Tesla bought its first Bitcoin and said it planned to accept Bitcoin payments. It was one of the first big companies to really commit to crypto, and Bitcoin's price subsequently surged to a new high. A few months later, Chief Executive Officer Elon Musk backtracked and said Tesla would halt plans for Bitcoin payments because of environmental concerns.

Tesla went on to sell 75% of its crypto in the second quarter of 2022. Even so, it is still the fifth biggest corporate holder of cryptocurrency today, per Bitwise's latest market review. Tesla owns about 0.06% of the 21 million Bitcoins that will be produced. If you're worried Tesla will sell its holdings and rock the market again, take solace from the fact that Tesla doesn't have the dominance it did four or five years ago. It's still an important player, just not as important.

More companies are buying Bitcoin

According to Bitwise, 12 new public companies bought Bitcoin in Q1 2025, taking the total to 79. Together, those companies hold a total of 688,000 Bitcoins. It also says public companies bought over 95,000 Bitcoins in Q1 (16% of the total holdings).

The change in reporting rules is only one reason for the shift. Companies are also looking to diversify their investments and hedge against inflation and other global uncertainties. It helps that Strategy -- the software company that's built up a veritable trove of Bitcoin -- has gained more than 200% since last May.

Even so, investing in cryptocurrency is risky, whether you are a listed company or a private investor. Company balance sheets will now reflect both the ups and downs in prices. It's also important to understand any tax consequences. And it is still a volatile asset class. If prices fall, it will hurt a company's finances, no matter what accounting rules apply.

Bottom line

There weren't many winners in Tesla's most recent earnings reports. But corporate Bitcoin buying is one. Not only because it gave a much-needed boost to the electric car company's income, but also because it highlights the advantages of the new accounting rules.

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Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.