The progress of the autonomous driving and Optimus robot projects, along with the upcoming trillion-dollar compensation plan vote, will both influence Tesla's long-term strategy and investor confidence.
$Tesla (TSLA.US)$ Earnings reports have always been significant financial events, carrying immense investor expectations. The upcoming Q3 earnings report, scheduled for release after the US stock market closes on Wednesday, is no exception.
This time, the electric vehicle maker's performance is expected to once again surpass Wall Street's forecasts. However, it remains unclear whether investors will take notice.
Earnings Expectations
Based on analyst data tracked by FactSet, Tesla is projected to generate $26.4 billion in revenue, representing a 17% increase quarter-over-quarter, primarily driven by a surge in purchases ahead of the expiration of U.S. electric vehicle tax credits.
While the expiration of the tax credit is expected to impact Tesla and other electric vehicle manufacturers in the current quarter, this 'last-minute rush' effect has propelled Tesla to achieve its highest-ever quarterly delivery volume.
Tesla reported that it delivered 497,099 vehicles in the quarter ended September, a year-over-year increase of 7.4%, significantly surpassing market expectations of 456,000 units. The majority of these deliveries were Model Y and Model 3 vehicles, with combined sales of Model X, Model S, and Cybertruck accounting for less than 16,000 units.
Wall Street expects Tesla’s automotive business revenue to reach $19.6 billion, including $417 million in regulatory credit sales. The automotive gross margin, excluding credits, is forecasted at 16.3%, up from 15% in the previous quarter, serving as a key indicator of Tesla's core business health.
The income from carbon emission credits, which has historically bolstered Tesla’s profits, has continued to decline this year, and this trend is expected to persist. President Trump’s 'Beautiful Big Bill,' which eliminates penalties for automakers failing to meet Corporate Average Fuel Economy (CAFE) standards, has removed the incentive for carmakers to purchase credits from Tesla to avoid fines.
Adjusted earnings per share are projected at $0.55, reflecting a sequential increase of approximately 38% but a year-over-year decrease of 24%. Net profit is expected to be around $1.8 billion, down from $2.2 billion in the same period last year.
Prospects for Autonomous Driving and Robotics Business
The key focus for investors and analysts lies in Tesla's future—not only whether the company can maintain its dominance in the electric vehicle sector, but also whether it can realize CEO Elon Musk’s grand vision in the robotics field.
Musk has consistently emphasized that Tesla is more akin to an artificial intelligence company than a traditional automaker. He has repeatedly pointed out that humanoid robots and autonomous vehicles are the keys to Tesla's future growth.
During Wednesday's investor call, it is anticipated that Musk will provide updates on related technological advancements.
Dan Ives, an analyst at Wedbush Securities and a Tesla bull, wrote in an investor note last Sunday: “We remain firmly convinced that the most important chapter in Tesla’s growth story is just beginning.”
He projected that Tesla's current market capitalization of $1.5 trillion could rise to $2 trillion by early next year and reach $3 trillion by the end of 2026, primarily driven by mass production in robotics and autonomous driving businesses.
Tesla has already launched its autonomous taxi service in July in Austin, Texas, though it is currently operated by Model Y vehicles with safety drivers supervising. The company has secured operational permits in California, Nevada, and Arizona and plans to expand further to other cities across the United States.
Tesla expects to achieve commercialization of fully autonomous driving by 2026, with Musk predicting that by the second half of next year, there will be 'millions' of Teslas equipped with autonomous capabilities. The Cybercab model, designed specifically for autonomous driving without a steering wheel or pedals, is slated for mass production next year, with an eventual price tag of around $30,000.
However, not all analysts share Musk's vision. Garrett Nelson, an analyst at CFRA Research, stated that while he is impressed by Tesla’s technological progress, he believes Musk may be 'overpromising,' setting 'unrealistic expectations' for short-term growth in the robotaxi network.
Nelson pointed out that rapidly rolling out the service nationwide poses 'significant litigation risks,' prompting him to downgrade Tesla’s rating from 'Hold' to 'Sell' last month.
Tesla is facing multiple lawsuits, with plaintiffs alleging that its driver-assistance system caused accidents. The company settled two cases last month and has appealed an August ruling that held Tesla partially responsible for a fatal 2019 crash involving the Autopilot system.
Another highly anticipated initiative is the 'Optimus' humanoid robot project. Elon Musk has envisioned these robots performing tasks ranging from factory work to childcare, and even selling popcorn. Just last month, he stated that 80% of Tesla's corporate value would eventually come from the robotics business.
However, the project has faced challenges. According to foreign media reports, Tesla has canceled plans to deploy 10,000 robots internally this year. Milan Kovac, the vice president in charge of the Optimus robots, left the company in June after nine years of service.
The Trillion-Dollar Question
Although Musk’s compensation was not the central issue of this earnings call, related questions may still arise as Tesla’s annual shareholder meeting approaches on November 6. At that time, shareholders will vote on whether to retain the largest compensation package in history.
Shareholders will vote on several proposals related to Musk's compensation. One would reinstate a pool of 60 million shares granted to employees and ensure Musk receives benefits from his 2018 compensation plan (which is still under review in Delaware court). Another proposal establishes new incentives, allowing Musk to earn up to approximately $1 trillion if Tesla meets specific targets.
Analysts widely expect investors to approve Musk’s new compensation package again, as they did in 2018 and 2024. For many shareholders, Musk is inseparable from Tesla’s ambitions, and they fear that if the proposal fails, Musk may shift his focus to SpaceX or xAI, potentially slowing Tesla’s robotics aspirations.
Over the past 12 months, Tesla’s stock price has surged more than 100%, driven by AI expectations and signals of Musk’s continued involvement. Last month, Musk purchased Tesla shares for the first time since 2020. To fully realize the benefits of the new compensation plan, he must remain with Tesla for the long term.
Seth Goldstein, an analyst at Morningstar, said: 'If you are a Tesla shareholder, you likely believe in Elon Musk’s vision… You believe he is the right person to lead Tesla forward. If Elon Musk can take Tesla from a $1.5 trillion company to an $8.5 trillion one, long-term investors will reap substantial rewards.'
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Editor/rocky
