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Tesla Returns To Profitability, Smashes Analyst Estimates

Rei writes: After two profitable quarters last year, Tesla was hit by a perfect storm of filled U.S. backlog, S/X cannibalization by Model 3, a botched international launch, and price cuts due to U.S. tax credit phaseouts, leading to a very poor Q1 showing. While cashflow went positive in Q2, profits remained elusive, and — relying on lower-cost Model 3 variants with minimal U.S. tax credits — expectations for Q3 weren’t much better.

Instead, Tesla posted a blowout quarter: $5.3 billion record cash on hand, profits ($143M GAAP, $342M non-GAAP), margins rising from 18.9% to 22.8%, and sizeable growth in both solar and storage. Across the board, the company ran ahead of schedule: volume production of Model Y is pulled forward to next summer; Gigafactory 3 in Shanghai is producing cars and awaiting final sales certification after being built up from a muddy field in 10 months at a third the capital cost per vehicle; Semi (previously suggested as slipping to 2021) is back to 2020 production; and the production version of the solar roof tiles will be launching at an event on Thursday. The new, shipping crate-format Megapack energy storage products start being installed this quarter. As for vehicles, the company continues to be production constrained, with significant wait times on new orders in all markets; annual production and sales guidance of 360-400k was reiterated. Model S/X production is being raised to make up for new demand for the “Raven” update. On the self-driving front, while the company launched Smart Summon at the end of Q3, only $30 million of revenue was recognized because of it; half a billion dollars of unrecognized Full Self Driving (FSD) revenue remains on the books for future quarters. The company reiterated guidance of FSD being “feature complete” (handling all driving from driveway to destination, with supervision) by the end of this year at least as a limited prerelease, and capability for unsupervised driving by the end of next year, limited by the rate of regulatory approvals. Also announced as upcoming in the next few weeks: OTA upgrades for range on new Model S/X vehicles, a 3% OTA performance improvement to S/X, and a 5% performance improvement for Model 3.
During the earnings call, Musk credited the surge in progress in Tesla’s non-core divisions to being able to dedicate more engineering and financial resources to them after stabilizing Model 3 production rates and costs. Tesla’s stock surged 20% in aftermarket trading, equivalent to the company’s second-highest percentage gain ever, and its highest in absolute terms. Electrek, The Financial Times, and CNBC are reporting Tesla’s third-quarter earnings.

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