Tesla Q1 Misses By 30% Yet Stock Rises

With only a 2% operating margin in Q1, Tesla barely broke even. And things are set to get worse.

After missing Q1 2025 consensus EBIT estimates by 54% and EPS estimates by 30%, Tesla did what it does best: go up.

• While Tesla’s Q1 2025 EPS of $0.27 missed the Street’s estimate of $0.38 by 30% (my estimates of $0.30 by 10%), the stock is having a relief rally. Just like Q4 2022 and Q1 2024, the market has dubbed Tesla’s Q1 results—which barely broke even, at a 2% operating margin—”not as bad as expected”.

• No company update. Just the usual pumps: The stock rose by 5.4% in after-hours trading despite the horrible Q1 results, and in spite of no “Company Update” that Tesla said they’d have on the Q1 earnings call. Instead, it was nothing more than a replay of Musk’s Greatest Hits: “a million robotaxis next year”, “Optimus production next year”, and “Tesla will be the most valuable company on earth”.

• But there was ample bad news on the call about the existing vehicle and energy businesses, although it wasn’t as well-enunciated as the pumps about non-existent products in the future were (more details below).

• Tesla removes delivery guidance: On the Q3 2024 call, Musk said that Tesla should see “20% to 30% delivery growth [in 2025]”. In the Q4 2024 presentation material, Tesla merely guided for a “return to growth in 2025”. Now Tesla has removed its 2025 delivery guidance and simply said that “We will revisit our 2025 guidance in our Q2 update”.

• Tesla admits they’ll have “remote drivers” for their robotaxis in Austin: Tesla’s VP for Autopilot & AI Software confirmed that there will be remote operators for the robotaxis that Tesla launches in Austin in June. This should disappoint the Tesla FSD absolutists, as it is exactly what they jeered Waymo for having done when it started testing its robotaxi service 8 years ago.

• Tesla admits “new” model is a stripped-down Model Y: Without using the term, “stripped-down” or “tweaked” Model Y, Tesla’s head of vehicle engineering said that the new model will be “confined to what is possible on the existing 3 & Y lines. He also admitted that Tesla is experiencing launch glitches (more details below).

• US Megapack business to be negatively impacted: While not giving much detail, Tesla addressed the problem of their LFP battery imports from China and Trump’s 245% tariff on Chinese imports by essentially saying, “it’ll be okay”, without specifying “by when”. In a report after Trump hiked the China tariff to 245% (here), I estimated that the Energy business should lead to an EBIT loss of -$3.6 billion in Q3 and -$0.95 in EPS, given that 33% of normal Megapack costs were made up by battery cells.

• Free-Cash Flow (FCF) will remain under pressure throughout 2025: Tesla barely broke even on a FCF basis in Q1 and only did so because capex was halved and suppliers weren’t paid. Given that Tesla’s 2025 capex guidance is for “over $11 billion”, its low spending rate in Q1 of only $1.49 billion means that the rest of this year will need an average of $3.20 billion of capex per quarter. This is 13% higher than 2024’s run-rate of $2.84 billion per quarter and is above Q1’s operating cash flow level of $2.15 billion. Given the weak demand environment, it’s quite possible that Tesla generates negative FCF or is forced to cut its capex plans in 2025.

• US vehicle production costs to rise from May: The only thing that offset higher costs due to the Model Y retooling was the higher price of the Model Y after it was launched. Given that the refreshed Model Y in China already needs discounts of around $2,500 (0% loans for 3 years & free insurance), this doesn’t bode well for prospects of new Model Y price cuts (due to no wait lists in the US) and higher costs in the US due to the Trump auto tariffs of 25% kicking in from May.

• Musk voiced his disapproval of Trump’s trade wars: It’s likely not a coincidence that Musk announced his May return to Tesla (aside from a couple of days a week doing DOGE work if the president needed him), while voicing his disapproval of Trump’s tariff policies. Musk also said that any country that can’t make drones (America?), will become a “vassal state” of those who can make more drones. Let that sink in”. I’m not a politician (and neither is Musk), but this isn’t a very savory comment about Trump, from whom Musk needs a pardon when he leaves the White House, given all the laws Musk has broken.

• Q1 2025 was one of the sleazier earnings calls in recent memory: While we’re used to Musk and his pie-in-the-sky pumps, it was quite off-putting to see the other Tesla executives on the call pumping Tesla more than usual, as if prompted to do so. Instead of clarifying the risks ahead—which are plenty—they spent more time boasting about FSD and the Model Y.

• Remember that on the Q1 2024 call, Musk said “Q2 will be a lot better”: It’s important to keep in mind that Musk no longer has to worry about the SEC (as he’s likely emasculated it with his team at DOGE), and even when he did this time last year, he still blatantly lied: “Q2 will be a lot better”, he said on the Q1 2024 earnings call. Q2 2024 Automotive gross margin (ex-credits) fell from Q1’s level of 16.4% to 14.6%.