Tesla’s Daring Move
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What recent earnings report did Tesla release?
Tesla makes an awfully daring move. This is Motley Fool Money.
Welcome to Motley Fool Money. I'm Tyler Groh, and today I'm joined by longtime Fool contributors Matt Frankel and John Quast. Guys, the earnings firehose has been set to full blast this week because we have seen a slew of earnings reports across just about every industry. We can't hit everything in this one show alone. We're going to focus on the big companies and the bold moves today. We'll look at Meta and Microsoft moving big time in the market, but we're going to start with what's mentioned in the headline here with Tesla. The company reported earnings per share of $0.50 for the quarter. It beat estimates, but it was down 63% from this time last year, and it was the lowest fourth quarter earnings results since 2020.
What bold moves did Tesla announce regarding its vehicle production?
Now, what likely surprised anyone more than anything else in the numbers was Tesla's very ambitious capital spending plan and the things they were talking about on the conference call. Tesla announced it will more than double its annual capital spending to $20 billion for 2026. Elon Musk floated the idea of building his own semiconductor fab. factories. Tesla expects to invest $2 billion in Elon Musk's private XAI, their AI startup. And it announced it would discontinue production of its S and X models so it can repurpose its Fremont plant for building Optimus robots. Guys, I feel like I read a 10-K just listening to the transcript and trying to get through all of this. It's been huge moves and a lot of announcements from Tesla.
I see it as two ways of looking at it. Either one, Tesla is pushing all of its chips into the autonomy, robot, and AI table.
How is Tesla's capital spending plan evolving?
damn the torpedoes, we're going this way. Or two, these ambitious announcements might be papering over the fact that its auto business is a little bit in decline and its financials are not what they were. Now, of those two camps, which one are you in? Or is maybe there's some secret third camp that I'm missing here?
I think it's a little bit of both, Tyler. Love them or hate them, I think we can all agree that nobody tells a better story than Elon Musk. To be sure, there's an element of storytelling in here somewhere. There's a desire to create a narrative. I think that part of the narrative creation has to do with its recent change of the Tesla mission statement. This is a big thing. The mission statement was to accelerate the world's transition to sustainable energy. Now the mission statement is to build a world of amazing abundance. As Musk tells this story, Optimus robot program, autonomy, this is all part of creating abundance. Considering that that is now the mission statement of Tesla, it makes perfect sense to go all-in on production of Optimus and these other autonomy efforts.
Discontinuing the lines of S and X models to repurpose them for robot production is what's going on. This fits that narrative. But here's the thing. Matt pointed this out before the show. X and S models, they account for less than 5% of Tesla's overall vehicle sales. The truth is, these models aren't really selling anyway.
What implications does Tesla's mission statement change have on its strategy?
It made sense to get rid of them, whether or not autonomy was the big picture plan here. It's a little bit of both, in my opinion. X and S aren't selling. It makes sense to get rid of them. But the push is towards autonomy. It is towards abundance. It makes sense to go all in here.
I'm on the fence between the two sides that Tyler mentioned. On one hand, Tesla's auto segment revenue declined 11% in the fourth quarter. I don't really think it's a surprise to anyone. There's just a lot more competition for EVs than there were just a couple of years ago. It's only going to intensify. GM is making a big push into EVs, and others are following suit. I'm not sure if Tesla is necessarily papering over its declining auto business. or that its leaders suddenly have a renewed sense of urgency to adapt to it before things get worse. I'm also not surprised to see the Model S and X discontinued. As John mentioned, it's roughly 5% of sales, and that includes the Cybertruck in that 5%.
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Chapters
8 chapters
1
What recent earnings report did Tesla release?
0:05–1:03
2
What bold moves did Tesla announce regarding its vehicle production?
1:03–2:03
3
How is Tesla's capital spending plan evolving?
2:03–3:36
4
What implications does Tesla's mission statement change have on its strategy?
3:36–4:44
5
How are Meta and Microsoft performing in their latest earnings reports?
4:44–6:20
6
What are the contrasting market reactions to Meta's and Microsoft's capital expenditures?
6:20–8:08
7
What should investors consider regarding AI investments in Microsoft and Oracle?
8:08–10:22
8
What stocks are on the radar after the earnings review?
10:22–20:28