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Saturday, Feb 22, 2025

Tesla reports its longest-ever profitable streak, topping Wall Street's expectations for the second quarter

Tesla reports its longest-ever profitable streak, topping Wall Street's expectations for the second quarter

Tesla reported a second-quarter profit, its fourth in a row, on Wednesday afternoon.
The earnings beat comes after a quarter marred by coronavirus shutdowns and macroeconomic headwinds. . Shares rose as much as 7% in after-hours trading following the report, continuing a months-long rally to record highs.
Tesla turned a profit in the second quarter, it said Wednesday, topping Wall Street's expectations for the three-month period marked by coronavirus shutdowns, cementing its longest streak of profitability in company history.

"We believe the progress we made in the first half of this year has positioned us for a successful second half of 2020," the company said in a press release. "Production output of our existing facilities continues to improve to meet demand, and we are adding more capacity. Later this year, we will be building three factories on three continents simultaneously."

On a conference call following the release, Tesla announced Austin, Texas as the official location for its second US factory, where it will eventually build its Cybertruck and other vehicles.

"I've never been more optimistic or excited about the future of Tesla in the future of the company," CEO Elon Musk said.

Shares of Tesla, already at record highs, rose as much as 7% in late trading Wednesday following the release.

The company also disclosed $428 million worth of revenue from regulatory credits that it sells to other automakers who make far fewer electric vehicles, its highest ever for the growing segment, helping to insulate the company's balance sheet from falling vehicle prices. In total for 2020, those credits will likely total more than $1 billion, CFO Zach Kirkhorn said.

Lower overhead costs thanks to a "temporary reduction" in employee compensation also helped to fuel the quarter's success, Tesla said. That's despite an increase in capital expenditures as the company builds its third car factory near Berlin in Germany.

Analysts on the call are likely look for insight about demand trends the company is seeing at home in North America as well as in the increasingly important Chinese market. They're also sure to ask for updates on the new European factory, and for any decisions on its second US factory, which is seemingly headed for Austin, Texas.

Before the pandemic hobbled the entire auto industry, Tesla had announced plans to build up to 500,000 vehicles in 2020, something says it will still be able to do despite the ongoing difficulties. Many of Tesla's competitors have in recent months lowered their expectations because of the negative economic environment.

For investors that have piled into the stock in recent months, sealing Tesla's status as the world's most valuable automaker, the beat is likely to be taken as pure vindication. Following delivery numbers that surpassed expectation in June, the stock has hit record highs on a near weekly basis, fueled in part by speculation it could be added to the benchmark S&P 500 index after a full year of profitability.

"We continue to believe EV demand in China is starting to accelerate with Tesla competing with a number of domestic and international competitors for market share with Giga 3 remaining the linchpin of success which remains the prize that Musk and Tesla are laser focused on capturing," Dan Ives, an analyst at Wedbush, said Wednesday.
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