Tesla posts best-ever quarterly revenue and profit

Investing

Tesla CEO Elon Musk leaves the Phillip Burton Federal Building on January 24, 2023 in San Francisco, California. | Photo by Justin Sullivan/Getty Images

Tesla beat analyst expectations in its fourth-quarter earnings report. However, expenses soared as the electric vehicle giant led by the nation’s wealthiest man Elon Musk grapples with a dim macroeconomic outlook and growing investor frustration toward Musk’s behaviour.

Tesla reported US$24.32 billion in revenue in the fourth quarter of 2022, a 37% increase from the same timeframe a year prior and coming in above the US$24.16 billion forecasted by analysts.

Profit came in at US$1.19 per share, or US$3.7 billion, far surpassing the analyst consensus of US$1.13 earnings per share.

“It was our best year ever on every level,” Musk asserted on a conference call with investors Wednesday, while Wedbush analyst Dan Ives called it a “flex the muscle” moment for the company in a tweet.

Tesla shares soared as much as 4% to $149 in after-hours trading before settling into a 1.7% gain.

Despite beating estimates, Tesla’s report card was far from perfect: It posted its worst gross profit margin since 2021, a 64% rise in operating costs year-over-year and a 49% quarterly decrease in free cash flow.

In a statement accompanying the financials, the company vowed to navigate the “uncertain macroeconomic environment” with “relentless cost control and cost innovation,” placing blame on the highest interest rates in nearly two decades thanks to relentless hikes from the Federal Reserve, which Musk has frequently railed against.

The stock is up 34% year-to-date and gained 0.4% Wednesday after rallying to reverse a broader tech selloff following Microsoft’s bleak earnings report after Tuesday’s close. Tesla slashed prices on its cars by as much as 20% earlier this month in a surprise move that Morgan Stanley analysts called a “response to slowing incremental demand relative to incremental supply,” with the company previously reporting quarterly vehicle deliveries that fell short of expectations. Musk’s $44 billion acquisition of Twitter, finalized in October after six months in which each party aired their dirty laundry, weighed heavily on Tesla. Musk has served as Twitter CEO for the last three months, though he’s indicated he hopes to name a replacement soon. Tesla stock tanked as Musk offloaded $22.9 billion worth of his shares in the company to finance his Twitter deal, though Musk vowed in December not to sell any more Tesla stock for at least two more years. But Musk furthered his commitment to Twitter on Wednesday, changing his profile name on the site to “Mr Tweet” and admitting to the struggles of balancing running the social media giant and Tesla, writing, “It is not possible for me to fix every aspect of Twitter worldwide overnight, while still running Tesla and SpaceX, among other things.”

“The net value of Twitter, apart from a few people who are complaining, is gigantic, obviously,” Musk said Wednesday in response to an investor question on the decline of Tesla’s net favorability since Musk bought Twitter. The billionaire boasted about his 127 million followers on the site, saying it indicates he’s “reasonably popular” and his platform is “an incredibly powerful tool for driving demand for Tesla.”

$467 million. That’s how much Tesla received in automotive regulatory credits, roughly 2% of all revenues. The credits, which Tesla sells to other automakers coming in below federal emission guidelines, are a key driver of the company’s profitability as Tesla can pocket nearly all of the sales.

We estimate Musk to be worth $160 billion, less than half of his fortune’s $320.3 billion peak in November 2021, as Tesla shares tumbled roughly 65%—far more than the tech-heavy Nasdaq’s 30% decline over the same period.

Musk testified in San Francisco federal court for about nine hours this week as part of a civil lawsuit seeking billions in damages from Musk over his infamous 2018 tweet saying he secured funding to take Tesla private at $420 per share, causing shares of the company to gain 6% before falling dramatically. The billionaire said 420’s association with marijuana was purely coincidental and testified he “was doing the right thing” in tweeting what he believed to be material nonpublic information to benefit retail investors.