TSLA · Research with Graham

Steve Yeow · TSLA · 2026-09-29

worth watching

Graham · TSLA

The call — Tesla's core automotive and energy businesses are growing in volume but suffering from severe margin compression, meaning the current price of $357.4 relies almost entirely on unproven AI and robotics expectations.

What it is — Tesla is a global electric vehicle manufacturer transitioning into an energy storage provider and real-world AI robotics platform.

What changed — In 26Q2, revenue rose 25.5% YoY to $28.24B on record deliveries of 480k vehicles, but operating margin collapsed to 1.41% (down from 4.1% a year ago) due to a 49% surge in R&D to $2.37B and massive capital expenditures of $5.79B, leading to negative free cash flow of $1.09B.

By product line — Automotive (73% of TTM revenue): 26Q2 revenue grew 23% YoY to $20.52B, but carbon credit revenue dropped to $150M. While volume is up, average revenue per unit remains flat at ~$43k, and gross margins are pressured at 18.7% (TTM) by global competition. Energy Storage (12% of TTM revenue): Deployed 13.5 GWh (+41% YoY) in 26Q2, but segment gross margin dropped to 20.4% (down from 29.6% in 25H1) due to a $240M warranty provision and falling utility-scale prices.

What the price implies — The sum-of-the-parts model values the reported businesses plus net cash ($8.65) at $11.25 (low), $38.57 (middle), and $119.43 (high) per share. Including probability-weighted Robotaxi and Optimus expectations, the high-case valuation is $215.47. The current price of $357.4 implies the market is pricing in near-certain, massive commercial success for Robotaxis and Optimus far ahead of current deployment realities.

What would change my mind — Automotive gross margins recovering above 20% without carbon credits, or Robotaxi weekly paid rides scaling past Waymo's 500k level.

The next thing worth watching is the regulatory progress and production ramp of the Cybercab at Gigafactory Texas.