Tesla Earnings: Shares Fall Slightly as Management Raises Capital Expenditure Guidance

Key Morningstar Metrics for Tesla

• Fair Value Estimate
  : USD 400
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : Very High

What We Thought of Tesla’s Earnings

Tesla’s TSLA first-quarter earnings saw strong year-over-year growth in operating profits and free cash flow. However, shares were down 1% in after-hours trading on April 22 at the time of writing as the market reacted to management raising its 2026 capital expenditure guidance.

Why it matters: Management now expects to spend over USD 25 billion in 2026, roughly triple 2025 levels, while also guiding to negative free cash flow for the remainder of the year. We think investors are reacting to the negative free cash flow guidance, sending shares down.

• The heavy investment is tied to Tesla’s plan to transition from selling autos and energy storage batteries to autonomous vehicles and humanoid robots. We view this as a good investment for Tesla, given progress on both initiatives.
• In robotaxi, Tesla recently expanded to two new cities without safety monitors in the vehicles. We assumed all new city expansions would feature safety monitors, but we view this as a sign that the autonomous driving software continues to improve.

The bottom line: We maintain our USD 400 fair value estimate for narrow-moat Tesla. We view Tesla shares as fairly valued, with the stock trading around our fair value estimate and in 3-star territory. We recommend investors wait for a larger margin of safety before considering an entry point.

• We increased our weighted-average cost of capital assumptions to reflect a higher cost of equity. We also raised our capex forecast for the next few years. Separately, we increased our assumptions for robotaxi, autonomous driving subscriptions, and Optimus valuation. These changes largely offset.