Tesla 10-Qquarter ended 2026-03-31
Positive
Better automotive pricing and mix lift margins as Robotaxi and AI expansion drive planned FY2026 capex above $25B.
Filed 2026-04-22 21:43 ET
Key figures · Q1 FY2026 · period ended 2026-03-31
- Revenue$22.4BYoY +15.8%QoQ −10.1%
- Operating income$941.0MYoY +135.8%QoQ −33.2%
- Net income$477.0MYoY +16.6%QoQ −43.2%
- Total assets$143.7BYoY +14.9%QoQ +4.3%
- Total debt$9.2B1YoY +22.6%QoQ +10.2%
How total debt adds up Current portion of debt and finance leases $1,447M + Debt and finance leases, net of current portion $7,782M Total debt $9,229M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$84.1BYoY +12.7%QoQ +2.4%
- Tangible book value$84.1B2YoY +13.3%QoQ +2.9%
Notes (2)
- Total debt: Current and long-term debt combined with finance leases -- this filer's own balance-sheet lines, not a standard concept.
- Tangible book value: No goodwill is reported. No intangible assets are reported.
How this filing reads
- Health+0.6Cash and short-term investments were $44.7B against $9.23B of debt and finance leases.
- Momentum+0.8Revenue rose 16%, gross margin expanded 4.8 points, and operating income increased 136%.
- Outlook0.0Energy contracts cover $10.2B, while FY2026 capital expenditures above $25B raise execution and funding demands.
Executive Summary
Tesla’s Q1 2026 operating recovery was substantive: revenue grew 16%, gross margin expanded, and operating income more than doubled despite sharply higher AI spending and stock-based compensation. Net income improved only 17%, as foreign-exchange and bitcoin-related losses and a higher tax rate absorbed much of the operating gain. Automotive pricing and mix supported growth, while energy storage delivered higher profit despite lower deployments, partly through one-time tariff benefits. For investors, the central trade-off is improving core economics against a capital-intensive autonomy and AI expansion: planned FY2026 capital expenditures exceed $25B, making execution, liquidity consumption and dilution increasingly consequential.
Key Financial Highlights
| Metric | Q1 2026 or 3/31/2026 balance | Investor interpretation |
|---|---|---|
| Revenue | $22.4B; +16% Y/Y | Automotive sales and services offset weaker energy revenue. |
| Gross profit / margin | $4.72B; +50% Y/Y / 21.1% vs 16.3% | Better pricing, mix and costs materially improved profitability. |
| Operating income / margin | $941M; +136% Y/Y / 4.2% vs 2.1% | Gross-profit gains outpaced expanding operating expenses. |
| GAAP net income / diluted EPS | $477M; +17% Y/Y / $0.13 vs $0.12 | Non-operating losses and taxes limited earnings growth. |
| OCF / capital expenditures / FCF | $3.94B / $2.49B / $1.44B | Cash generation exceeded current investment spending, but not the planned spending pace. |
| Total assets | $144B; +4.3% since year-end | Expansion reflects inventory, infrastructure and investment additions. |
| Total stockholders’ equity | $84.1B | A substantial capital base supports the investment program. |
| Cash and short-term investments | $44.7B; broadly flat since year-end | Liquidity remained substantial despite investment outlays. |
| Total debt and finance leases, carrying value | $9.23B | Current leverage is modest relative to liquidity. |
- Revenue mix: automotive $16.2B, services and other $3.75B, and energy $2.41B. Services grew 42%, broadening revenue beyond vehicle sales; other international revenue grew 60%, while U.S. revenue increased 3.3% and China declined 2.8%.
- Cash conversion: OCF exceeded net income substantially, reflecting noncash adjustments and a $929M favorable Y/Y change in operating assets and liabilities. FCF increased from $664M; capital expenditures exclude finance leases and are net of asset sales.
- Earnings headwinds: other expense increased to $535M from $119M, primarily from foreign-exchange movements and bitcoin mark-to-market adjustments. The effective tax rate rose to 34% from 29%, partly because CEO-award compensation is nondeductible.
- Compensation and dilution: stock-based compensation increased 80% to $1.03B, including $260M for the CEO performance award. Shares outstanding increased by 4M to 3.76B during Q1; compensation expense is therefore material relative to reported earnings.
- Inventory: $14.4B, +16% since year-end; finished goods increased 41% to $6.84B. Production of ≈408,000 vehicles exceeded deliveries of ≈358,000, tying up capital and increasing exposure to demand or pricing pressure.
Business Developments
Management is directing resources toward FSD (Supervised), Robotaxi, Cybercab, Optimus and AI infrastructure alongside its vehicle and energy businesses. Robotaxi continued expanding after its 6/2025 launch, Cybercab entered pilot production, and Tesla is expanding AI training compute, battery-material production and manufacturing plans that include semiconductor fabrication. These initiatives broaden potential revenue sources but increase concurrent execution demands.
Energy expansion includes Shanghai and Lathrop Megafactories and a new Texas facility. Existing longer-term energy contract obligations of $10.2B provide revenue visibility, with $5.02B expected within 12 months; deployment timing and margins remain distinct questions.
Capital allocation also moved beyond internal projects: Tesla invested $2.00B in SpaceX for less than 1% ownership. In 4/2026, it agreed to acquire an AI hardware company for up to $2.00B in stock and equity awards, with ≈$1.8B dependent on service conditions or deployment milestones.
Risk Assessment
- Investment execution and funding: FY2026 capital expenditures above $25B substantially exceed annualized Q1 OCF, implying greater reliance on liquidity or financing unless cash generation accelerates.
- Demand, policy and supply: removal of electric-vehicle tax credits, competition, tariffs and supplier constraints can weaken demand or raise costs; management identifies energy storage as particularly exposed to current tariffs.
- Compensation and dilution: the CEO award covers 424M shares, with $9.97B of unrecognized compensation for the milestone deemed probable; additional milestones could materially increase expense and dilution.
- Litigation and autonomy: Autopilot/FSD litigation and regulatory scrutiny threaten deployment and brand value; Tesla is appealing a verdict awarding $129M compensatory and $200M punitive damages.
- Foreign exchange: an adverse 10% currency move implies a $1.69B pre-tax gain or loss sensitivity, with significant intercompany exposure typically unhedged.
- Energy margin durability: the 39.5% energy gross margin benefited from lower material costs and one-time tariff benefits; lower deployments and possible customer tariff refunds complicate extrapolation.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: FY2025 10-K.
Strategic Outlook and Investor Actionables
Tesla is using improved core profitability to fund a broader AI and autonomy platform. The investment thesis now depends on converting these projects into durable cash earnings without sacrificing liquidity or excessive dilution.
- Core demand: monitor deliveries versus production, finished-goods inventory and automotive margins; inventory normalization without pricing concessions would strengthen the recovery thesis.
- Investment coverage: track OCF, FCF and cash balances against the planned spending ramp; persistent negative FCF would increase funding dependence.
- Commercial execution: monitor Robotaxi expansion, Cybercab production and energy deployments alongside compensation expense; commercialization must translate into revenue and cash returns, not only greater spending.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
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