Tesla reports Q3 earnings Wednesday: margins, Cybercab and cash burn in focus

Nearly all of those sales were Model 3s and Model Ys: 478,237, against 8,295 for everything else, a 47.9% drop for the other models, Zacks said. Tesla stopped selling the Model S and Model X this year, Reuters reported. In its second-quarter update it said it had decommissioned their lines at the Fremont, California, factory and begun building space there for its Optimus humanoid robot.

Margins and spending are the numbers to watch

The second quarter showed why investors are nervous. Revenue rose 26% from a year earlier to $28.24 billion, but operating expenses climbed 47% to $4.35 billion and income from operations fell to $398 million, a 1.4% margin. Capital spending more than doubled to $5.79 billion, and free cash flow came in at negative $1.09 billion. Adjusted earnings of 33 cents a share were well short of the roughly 53-cent consensus at the time, Electrek reported.

For the third quarter, Zacks analysts project automotive sales of $19.89 billion, down 2.3% from a year earlier, while the energy business is expected to grow 10.5% to $3.77 billion and services and other revenue 24.7% to $4.33 billion. Income from selling regulatory credits to other automakers, once a reliable cushion, is projected at $240.48 million, down 42.3%. A separate Zacks preview put the expected automotive gross margin at 17.3%.

Robotaxis, Cybercab and the Roadster

Much of Tesla's spending is going to products that earn little today. In July the company said Cybercab, its two-seat robotaxi without a steering wheel or pedals, had started production at its Texas factory, that its Robotaxi service was running in seven U.S. metro areas after launching in three Florida cities, and that the Tesla Semi was on track for production this year at a new plant in Nevada. Analysts will be listening for how fast those operations are growing and what they cost.

The call also follows the Oct. 15 reveal of the next Roadster at a SpaceX test site in Texas. Tesla said production would start in 2028 and is taking $50,000 deposits for a Performance version and $250,000 for a Thrust version, but gave no price, Reuters reported. Elon Musk said in 2023 that the car would not move the needle financially.

Tesla's shares were last quoted at $354.72 going into the week, according to MarketBeat, below their 52-week high of $498.83. In July, Tesla closed its update by saying, "We've never been more optimistic about the future." Wednesday's numbers will show how much that optimism is costing in the meantime.

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