Tesla Posts One of Worst Quarters Since 2022

Automotive revenue, which has always been Tesla’s main driver, fell 20% year over year. They sold 337,000 cars, down 13%, and that’s after price cuts have already hurt their margins. Not only are Teslas selling fewer cars, they’re also making less money on each one. The EV market is saturated, and competitors like BYD, Hyundai, and even VW are eating into Tesla’s space.

Tesla EV Sales Are Falling

• Operating income fell 66%,
• Net income fell 71%,
• and EPS was $0.27.

For any other company, this would be bad. But Tesla is sitting on $37 billion in cash and just posted $664 million in free cash flow. They are still generating money — just not as much as they used to. So the company is not in danger.

Energy and Software Are Quietly Taking Over

There’s one area that’s growing fast: energy. Tesla’s energy generation and storage unit grew 67% year over year to $2.73 billion. If the margins here start to look good, Wall Street will change its narrative, and this could quietly become Tesla’s strongest section for the next few years.

And then there’s software, fully autonomous driving isn’t mainstream, but it doesn’t have to be. Even if 15% to 20% of owners buy it, Tesla will make a huge profit on each unit thanks to its large software margins. If they ever release a true autonomous solution — even partially — it could send the stock higher again.

Regulatory credits are back, $595 million this quarter, up 35%. But that income is borrowed time. After all, it won’t be long before other automakers meet emissions standards.

Tesla Bottom Line Is

Tesla still has $37 billion in cash, positive free cash flow, and its energy division is growing 67% year over year. If energy margins improve or FSD adoption increases even modestly, sentiment could change quickly. That’s the mindset.

So what to do?

• Don’t hold blindly.
• If Wall Street starts pricing energy and software, the stock will quickly become overvalued.
• Use volatility. These are headline-driven stocks reverting to the mean right now.
• Q1 was weak, watch Q2 for true energy margins or FSD ( Full Self-Driving) monetization. If they lose again, sell the rally. If they surprise, take advantage of the reversal.