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Tesla’s Q4 results delivered four surprises the market wasn’t expecting, explaining the muted 2.94% after-hours gain despite a 13.6% non-GAAP EPS beat.
The Unexpected Positives
Gross margin expansion to 20.1% crushed the 17% estimate by 310 basis points. This marks a dramatic reversal from Q3’s 18% margin and signals pricing power is returning despite aggressive competition from BYD. Energy storage revenue surged 25% to $3.84B, far exceeding typical projections and offsetting automotive weakness.
The Hidden Negatives
Free cash flow collapsed 30% to $1.42B versus expectations of $2-3B, despite the revenue beat. This suggests Tesla is burning cash to maintain margins. Automotive revenue plunged 11% year-over-year to $17.7B, significantly worse than the modest decline analysts anticipated, confirming delivery weakness wasn’t just a volume story but a pricing problem.
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While Tesla’s automotive segment generated $17.7B in revenue, the company’s Energy Generation & Storage division delivered the quarter’s standout performance. Energy storage revenue reached $3.84B, demonstrating strong demand for Tesla’s Megapack and Powerwall products as grid-scale battery deployments accelerate globally.
Services and Other revenue reached $3.37B, reflecting expanding Supercharger network usage and growing aftermarket service demand. This recurring revenue stream now represents 13.5% of total revenue.
The segment mix tells a clear story: Tesla is successfully diversifying beyond automotive, but not fast enough to offset core vehicle sales pressure. Energy margins remain strong, helping push overall gross margin to 20.1% despite automotive headwinds. Investors will watch whether energy growth can sustain strong rates through 2026.
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- ENERGY BUSINESS EXPLODING
- Energy storage revenue: $3.84B (+25% YoY)
- This is actually impressive growth
- GROSS MARGINS IMPROVED
- 20.1% vs 16.3% last year (+386bps)
- Shows pricing power is returning
- SERVICES REVENUE GROWING
- $3.37B (+18% YoY)
- Recurring revenue stream expanding
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- AUTOMOTIVE REVENUE COLLAPSED
- Down 11% year-over-year to $17.7B
- This is Tesla’s core business – this is BAD
- Deliveries were weak (as predicted by consensus)
- FREE CASH FLOW CRATERED
- $1.42B vs $2.03B last year (-30%)
- Despite beating revenue, cash generation is weak
- Capital expenditures remain high ($2.4B)
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Tesla stock is now up 2.94% after-hours:
| Metric | Expected | Actual | Result |
|---|---|---|---|
| Total Revenue | $24.5B | $24.9B | ✅ BEAT by 1.6% |
| Automotive Revenue | ~$20-21B | $17.7B | ❌ MAJOR MISS (-11% YoY) |
| EPS GAAP | $0.30 | $0.24 | ❌ MISS by 20% |
| EPS non-GAAP | $0.44 | $0.50 | ✅ BEAT by 13.6% |
| Gross Margin | 17.0% | 20.1% | ✅ BEAT by 310bps |
| Operating Margin | 4.3% | 5.7% | ✅ BEAT by 140bps |
| Free Cash Flow | ~$2-3B | $1.42B | ❌ MISS (-30% YoY) |
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The stock is up 3.5% after hours as we wait to see delivery and earnings numbers.
Live
We expect Tesla’s earnings to be released at 4:05 p.m. ET.
The moment they hit we’ll begin posting live news and analysis.
Shares of the company are up .73% in late trading on Wednesday.
Live
Prediction markets place 93% odds Microsoft beats earnings, 94% Meta beats, and 93% IBM beats.
By comparison, the odds Tesla beats Wall Street’s $.45 estimate for tonight’s EPS is just 40%.
The good news for Tesla investors: that means expectations are already low headed into tonight’s earnings. Wall Street has seen that deliveries declined 15.6% in Q4 so expectations will be muted. That doesn’t mean Tesla won’t drop, but it does provide some ‘cushion’ if the company misses Q4 EPS estimates.
Tesla (NASDAQ: TSLA) reports Q4 2025 earnings after the bell today. Shares are down 5% in the past month heading into the print, and prediction markets are pricing just a 40% chance of a beat. After missing Q3 estimates by 11%, this report will test whether the stock’s valuation can hold without near-term execution.
What Changed Since Last Quarter
Tesla missed Q3 estimates badly, reporting $0.39 per share against expectations of $0.44. That followed an even worse Q1 miss of 66%. Full-year 2025 EPS is expected at $1.64, down from 2024’s $2.42. The pattern is clear: margins are compressing while the stock trades at a heady 196x forward earnings.
Since October, the story hasn’t improved. December European registrations fell 20% year over year. Brand value dropped $15.4 billion in 2025 according to Brand Finance. Delivery volumes declined 15.6% in Q4 compared to last year, marking the second consecutive year of overall delivery declines.
The stock is up 9% over the past year, but that’s entirely on the promise of autonomy and energy, not the car business.
Consensus Estimates
| Metric | Q4 2025 Estimate | YoY Growth | Full Year 2025 (Est.) |
|---|---|---|---|
| EPS | $0.45 | Down significantly | $1.64 |
| Revenue | $24.75B | Modest decline | $94.67B |
Margins and Energy Will Set the Tone
I’m watching gross margins first. Gross margins returned to 18% last quarter, and Wall Street expects margins to land at 17.35% in Q4.
The energy business is expected to be the highlight. Storage and generation have shown consistent growth while automotive stumbles. If Tesla can show meaningful revenue contribution from this segment, it gives the bull case something concrete beyond robotaxi promises.
Key details to watch include FSD monetization. Lemonade’s 50% insurance discount for Full Self-Driving validates the technology, but investors are still trying to judge how quickly Robotaxi revenue could scale and how it impacts estimates for 2026 and 2027. Currently, Wall Street has Tesla at just $3.03 in earnings in 2027, meaning the stock trades for over 140X 2027 estimates.
The company’s Optimus timeline matters too. Musk said public sales by end of 2027, but production scale and pricing remain unclear.
As a reminder, Tesla doesn’t give traditional guidance, but rather provides a more qualitative outlook. So the specific language Tesla provides in its outlook and Q&A webcast will factor into how Wall Street reacts to the company’s earnings tomorrow.
Closing Thoughts
Tesla trades like a tech platform, not a car company. That’s fine if the platform businesses deliver. But with automotive fundamentals weak and valuation extreme, this quarter needs to show progress on the non-auto segments that justify the multiple. Wall Street already knows that deliveries decline 15.6% in Q4, so that ‘bad news’ won’t come as a surprise. Instead, the reaction to tonight’s earnings will likely be driven by areas like commentary around self-driving expectations for next year and how much Tesla will spend on capital expenditures next year.