TenQ

The Tesla story

Tesla builds electric vehicles and energy storage systems, with its transition toward AI services depending on whether FSD, Robotaxi and robotics can generate profits alongside its hardware businesses.

Written from Tesla's own filings with the SEC, and rewritten when it publishes a new earnings release. Updated 2026-09-30.

  • $357.45share price, last close
  • $1.41Tmarket value
  • 14/36TenQ Score checks passed
  • 60.2%growth a year the price assumes

The story in brief

  • Volume outpaces profit. In the quarter to June 2026, vehicle deliveries rose 25% to 480,126 units, but operating income fell 57% as expenses increased and vehicle pricing weakened.
  • Investment absorbs cash. Tesla generated negative free cash flow of $1.1 billion in the quarter to June 2026, while cash and short-term investments ended the period at $43.5 billion.
  • A demanding cash assumption. The reverse DCF implies 60.2% annual growth in free cash flow after stock pay for ten years, above the TenQ check's 38.7% bar.

What drives the business

  • Tesla's strategic shift is to use its automotive and energy generation and storage businesses to support AI services, including FSD subscriptions, Robotaxi and the development of Optimus robots.
  • Its direct customer relationships, charging network and software updates support a vehicle business led by Model 3 and Model Y, which accounted for 467,762 deliveries in the quarter to June 2026.
  • Powerwall serves homes and small commercial facilities, while Megapack serves commercial, industrial and utility customers, with expanding Shanghai production helping storage deployments reach 13.5 GWh in the quarter to June 2026.
  • Services and Other, which includes maintenance, paid charging and insurance, produced record gross profit of $648 million and a 14% gross margin in the quarter to June 2026.
  • Cybercab began production at Gigafactory Texas in the quarter to June 2026, and the July 2026 update reported Robotaxi operations in seven major U.S. metros, including newly launched unsupervised rides in Miami, Orlando and Tampa.

What the price assumes

At $357.45 per share, the reverse DCF implies that free cash flow after stock pay grows 60.2% a year for ten years, using a 10.2% discount rate.

Tesla delivered 73.4% annual growth on that measure over the last 5 years, but the TenQ check sets a 38.7% bar by slowing that record halfway toward 4%.

The implied growth is below the historical cash growth rate but above that moderated bar, while revenue grew 11.8% over the last twelve months and free cash flow before stock pay totaled $5.8 billion.

Value TSLA on your own assumptions

What could change the story

  • Revenue growth did not protect profitability in the quarter to June 2026: operating expenses rose 47%, and the operating margin narrowed to 1.4% as AI spending, stock compensation, lower vehicle pricing and reduced regulatory credit revenue weighed on results.
  • Capital expenditures increased 142% in the quarter to June 2026, making the timing of returns from factories, computing infrastructure and new products important despite $43.5 billion in cash and short-term investments against $9.1 billion in total debt.
  • Battery pack capacity remained the main constraint on near-term vehicle production growth in the July 2026 update, while a vendor cell issue increased energy warranty charges in the quarter to June 2026.
  • Evolving autonomous vehicle rules can restrict features or vehicle designs, and FSD in customer vehicles still requires active driver supervision, distinct from unsupervised Robotaxi operations.
  • Stock-based pay totaled $3.8 billion over the last twelve months, making compensation a substantial claim alongside cash generation and contributing to the importance of measuring free cash flow after stock pay.

What to watch next

  • Tesla's July 2026 outlook calls for Tesla Semi and Megapack 3 production to start in 2026, with Optimus production also anticipated in 2026 as initial production lines are installed.
  • The next releases will show whether factory utilization and battery pack capacity support deliveries and deployments as Tesla allocates vehicles between customers and its owned fleet.
  • FSD adoption, Cybercab fleet deployment and Services and Other profitability will help show whether software and fleet profits are developing as management expects, while operating margin, capital expenditures and free cash flow will show the cost of that transition.

Sources

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