Tesla (TSLA -2.02%) inventory is down 6% in after-hours buying and selling on Wednesday as of seven:39 p.m. ET, following the electrical automobile pioneer’s launch of its first-quarter 2023 outcomes. 

The inventory’s drop might be largely attributable to traders worrying in regards to the downward strain on earnings stemming from the corporate’s ongoing value cuts. Tesla started reducing costs on its vehicles throughout areas late final yr and continued its aggressive value chopping into the primary quarter. These value cuts are supposed to extend demand throughout a interval that is difficult for automakers due to excessive rates of interest and client issues a couple of doable recession.

Longer-term, Tesla’s selecting to drive auto gross sales volumes by reducing costs ought to show to be the correct transfer, for my part. The corporate has the chance to earn a living on its automobiles after the preliminary sale by way of autonomy, supercharging, connectivity, and repair. 

The next is an outline of Tesla’s first quarter centered on seven key metrics.

Picture supply: Tesla.

1. Income jumped 24%

Quarterly income grew 24% yr over yr to $23.33 billion. This outcome was according to the $23.21 billion Wall Road consensus estimate.

Income progress was pushed by elevated automobile deliveries and progress in different components of the enterprise, offset by decrease automobile common promoting value and foreign money headwinds.

Section year-over-year income efficiency was as follows:

• Automotive section income grew 18% to $19.96 billion.
• Power era and storage income soared 148% to $1.53 billion. Development was pushed by a 360% improve in power storage capability deployments to a file 3.89 gigawatt hours (GWh) and a 40% improve in solar energy deployments to 67 megawatts (MW).
• Companies and different income rose 44% to a file $1.84 billion. Development was pushed by used automobile and half gross sales, together with a rise in paid use of Superchargers.

2. Car manufacturing and deliveries grew 44% and 36%, respectively

In Q1, Tesla produced 440,808 automobiles (greater than 19,000 Mannequin S and X items and greater than 421,000 Mannequin 3 and Y items), up 44% from the year-ago interval.

And it delivered 422,875 automobiles (nearly 11,000 Mannequin S/X and greater than 412,000 Mannequin 3/Y), up 36% yr over yr.

3. Auto section gross margin was 21.1%

In Q1, the automotive section’s gross margin (gross revenue divided by income) based mostly on typically accepted accounting ideas (GAAP) was 21.1%. In contrast with different automakers, that is nonetheless a powerful auto gross margin. That stated, it was down considerably from 32.9% within the year-ago interval. It was additionally down sequentially, as this metric was 25.9% within the fourth quarter of 2022. These drops are as a result of firm’s ongoing value cuts.

4. Working revenue dropped 26%

The quarter’s working revenue declined 26% yr over yr to $2.7 billion. Working margin (working revenue divided by income) landed at 11.4%, down from 19.2% within the year-ago interval. 

5. Adjusted EPS fell 21%

In Q1, GAAP web revenue was $2.5 billion, or $0.73 per share, down 23% from the year-ago interval. Adjusted for one-time gadgets, web revenue got here in at $2.9 billion, or $0.85 per share, down 21% yr over yr. This outcome was according to the $0.85 adjusted earnings per share (EPS) that analysts had anticipated.

6. Working money movement declined by 37%

The quarter’s money generated from operations fell 37% yr over yr to $2.5 billion. Free money movement dropped 80% to $441 million.

Tesla ended the quarter with $22.4 billion in money, money equivalents, and short-term investments, up 24% from the year-ago quarter and up 1% from the prior quarter. 

7. Supercharger stations elevated by 33%

Tesla continued its stable tempo of constructing out its community of Supercharger stations. It ended the quarter with 4,947 stations, up 33% from the year-ago interval. Supercharger connectors grew 34% yr over yr to 45,169. 

1 / 4 with no large surprises

In brief, Tesla turned in 1 / 4 that was according to expectations. Whereas the auto gross margin was in all probability somewhat weaker than many traders had been anticipating, there have been no large surprises in key metrics.

Reiterating what I wrote within the opening, longer-term, Tesla’s selecting to drive auto gross sales volumes by reducing costs ought to show to be the correct transfer. The corporate can afford this technique, as its auto gross margin stays strong relative to trade averages.