Tesla is set to release its second-quarter 2026 earnings report on July 22. Here’s Morningstar’s take on what to look for in Tesla’s earnings and the outlook for its stock.
Key Morningstar Metrics for Tesla
- : USD 450.00Fair Value Estimate
- : ★★★Morningstar Rating
- : NarrowMorningstar Economic Moat Rating
- : Very HighMorningstar Uncertainty Rating
Tesla Earnings Release Date
- Wednesday, July 22, after the close of trading
What to Watch for in Tesla’s Q2 Earnings
- We know Tesla generated strong delivery growth during the second quarter after the early July report, and we will look to see the financial impact of this.
- We will pay close attention to Tesla’s free cash flow metrics as the company begins a heavy capital expenditure investment cycle to build the infrastructure required for its real-world artificial intelligence products.
- We will also be watching for an update on Tesla’s robotaxi rollout plans. We will look to hear management’s expansion plans, as well as an update on the robotaxi-dedicated Cybercab, which entered production.
- Along these lines, we hope to hear an update on when the full self-driving version 15 will be released, as Tesla’s FSD software could let it quickly expand its robotaxi fleet.
- Finally, we hope to hear an update on the Optimus humanoid robot project. We view the project as a large long-term growth driver for Tesla, as it could eventually perform many tasks and be purchased by both businesses and consumers.
Fair Value Estimate for Tesla
With its 3-star rating, we believe Tesla’s stock is fairly valued compared with our long-term fair value estimate of $450 per share. We raised our fair value from $425 due to our outlook for higher deliveries in 2026 than previously forecast, which will also drive higher automotive gross profit margins.
In 2026, we forecast deliveries will grow by roughly 10% to nearly 1.8 million, up from 1.64 million in 2025. We see lower U.S. deliveries in the first three quarters due to the U.S. EV tax credit expiration in September 2025. As Tesla ramps up production of its new, lower-priced Model Y and Model 3 vehicles, we expect automotive gross margins, excluding credits, to be in the high teens, slightly below management’s long-term goal of 20%. In the long term, we assume Tesla will deliver around 2.8 million vehicles per year by 2030, driven by the adoption of full self-driving software and the more affordable versions of the Model Y and Model 3.
Read more about Tesla’s fair value estimate.
Economic Moat Rating
We award Tesla a narrow moat, stemming from two of our five moat sources: intangible assets and a cost advantage. We think this combination will persist and allow the firm to generate excess returns on capital.
Tesla’s intangible assets come from consumers’ willingness to pay more for the technology that drives the brand. It also offers a high-tech vehicle for which customers do not have to visit a store for many service needs, which helps with brand equity. We also expect research and development to average 6% of sales over the next five years. With R&D spending in line with its peers, we think Tesla will be able to maintain its proprietary technological advantage.
We think Tesla benefits from a cost advantage in US electric vehicle production thanks to its manufacturing scale. We expect Tesla to continue to have lower costs than its US peers and have higher gross profit margins compared with its US automaker peers.
Read more about Tesla’s economic moat.
Financial Strength
Tesla is in excellent financial health. Cash, cash equivalents, and investments were $44.7 billion and far exceeded total debt as of March 31. Total debt was around $9 billion, but total debt excluding vehicle and energy product financing (nonrecourse debt) was less than $5 million.
Tesla’s growth going forward will be largely self-funded. With its positive free cash flow generation and large cash balance, we think Tesla should be able to fund its growth plans over at least the next two years without needing to raise debt.
Historically, Tesla has used credit lines, convertible debt financing, and equity offerings to raise capital. We think the company would have no problem raising debt if needed to fund its robotaxi and humanoid robot growth plans.
Read more about Tesla’s financial strength.
Risk and Uncertainty
We assign Tesla a Very High Uncertainty Rating, as we see a wide range of potential outcomes for the company. The automotive market is highly cyclical and subject to sharp demand declines based on economic conditions. Tesla is subject to growing competition as lower-priced EVs enter the market. Tesla has cut prices and offered lower-cost versions of its Model 3 and Model Y vehicles, and further price cuts could reduce profits.
The company is also investing heavily in R&D and capital expenditures to develop autonomous driving software, robotaxis, and humanoid robots, with no guarantee these investments will bear fruit. As of the last Securities and Exchange Commission filing, Tesla’s CEO owns roughly 13% of the company’s stock and uses it as collateral for personal loans, which raises the risk of a large sale to repay debt.
Tesla faces environmental, social, and governance risks. The automaker is subject to potential product defects, including those in its autonomous driving software, that could result in recalls. We see a moderate impact should this occur.
Tesla may also face regulatory issues in some US states due to laws that require automakers and dealers to be separate. We see a moderate probability but low materiality.
Read more about Tesla’s risk and uncertainty.
TSLA Bulls Say
- Tesla could disrupt multiple industries with its technology for EVs, AVs, batteries, and humanoid robots.
- Tesla’s full self-driving software should generate growing profits in the coming years as the technology continues to improve, leading to a robotaxi service and increased adoption by Tesla drivers.
- Tesla’s humanoid robot will create shareholder value, as its ability to perform multiple functions will transform manufacturing and be useful to consumers.
TSLA Bears Say
- Traditional automakers and new entrants are investing heavily in EV development, which will result in declining deliveries. This will force Tesla to cut prices due to increased competition, eroding profit margins.
- Tesla’s large investment in autonomous driving software will be value-destructive as the robotaxi product will face delays and competition from Waymo, which already offers a robotaxi service.
- CEO Elon Musk’s political activities will turn consumers away from buying a Tesla in key markets, including the United States and Europe, leading to lower sales and profits.
This article was compiled by Irza Waraich.
