Tesla hits $25B in Q2 revenue, but margins decrease amid price cuts

Tesla reported Wednesday net income of $2.7 billion in the second quarter, up 20% from the same period last year as once again, the company’s EV price cuts dug into profits. The automaker has repeatedly reduced the cost of its four EV models in the United States, Mexico, Europe and China. The move helped boost sales in the first half of the year, with Tesla hitting record Q2 deliveries of 466,140 units. But it’s also taken chunks out of Tesla’s normally healthy automotive margins.

For the second time this year, Tesla’s gross margins decreased to 18.2%, down from 25% in Q2 2022 and down from 19.3% last quarter. 

Tesla matched Wall Street revenue estimates of around $25 billion for the quarter, which is nearly 50% higher than year-ago sales of $16.9 billion. Most of the revenue came from Tesla’s automotive revenue, which hit $21.3 billion in Q2. That number includes $282 million from federal tax incentives. 

A small, but notable, chunk of Tesla’s Q2 revenue came from “services and other revenue,” which usually includes after-sales vehicle services and parts, retail merchandise, vehicle insurance and the Supercharger network. 

Tesla’s number of Supercharger stations and connectors increased 33% in the second quarter to 5,265 and 48,082, respectively. The automaker has been opening its network of Superchargers to other automakers in recent months, notably Ford and General Motors, and most recently Nissan. While charging isn’t a main revenue driver for Tesla, it’s possible that some of the increase came from Tesla opening up its charging network. 

Energy generation and storage revenue remained flat quarter-over-quarter, but grew 74% year-over-year.

Tesla’s operating margin dropped slightly from 11.4% in Q1 to 9.6% in Q2. Its capital expenditures remained flat QoQ but increased 19% YoY. The company reported it spent $2 billion in capital expenditures, likely due to continued production ramping in the automaker’s Berlin and Texas gigafactories. Tesla’s Q2 earnings show that Berlin’s vehicle capacity increased by 25,000 units over Q1 reported numbers. 

Tesla closed out the quarter with $1 billion in free cash flow, which is up from the $441 million it finished the first quarter with.

Tesla stock closed at $291.26 Wednesday and has remained mostly flat in after-hours trading.

The EV-maker will host a call with analysts and investors Wednesday evening at 5:30 p.m. ET, during which time listeners will hope to hear more information about Tesla’s Cybertruck. The first Cybertruck came off the production line at Giga Austin last week, but few details were shared. The earnings report is also lacking Cybertruck information, only stating that Tesla remains committed to the pickup being available this year.

Tesla’s full-year outlook hasn’t changed.

“For 2023, we expect to remain ahead of the long-term 50% CAGR with around 1.8 million vehicles for the year,” reads Tesla’s earnings report.

This story is still developing.