PREVIEW: Tesla's energy storage unit will pick up the slack when car margins fall and credit fade
Tesla's solar business and energy will likely outshine its core business, which is struggling to keep up with the competition. This week it will report its 'quarterly' results. It's a sign that Tesla has remained resilient as it slowly progresses in developing robots and autonomous driving technology.
Tesla's first negative quarter in two years is due to CEO Elon Musk’s plans to build robots and new assembly lines. The plan will cost around $20 billion. Tesla's profitability is down from its peak, and high-margin credits for regulatory compliance, which were once a major profit driver, have declined due to policy changes under President Donald Trump, Elon Musk's friend. The energy sector is growing faster and more profitably than Tesla's aging lineup of cars. This is due to the demand for large battery systems that power data centers. The honest summary is that energy storage cushioned the blow, but it was not large enough to offset the pressure of both the credit cliff (regulatory) and the erosion of automotive margins. "The trajectory is encouraging, but the magnitude of current growth is insufficient," Adrian Balfour said. He is founder and chairman at Envorso. Wall Street estimates that the unit will generate $18,3 billion of revenue in 2026. This is up from $12.8 in 2025. Gross profit will rise to $5.3 billion, and margins are expected to remain near 29%. The unit's revenues will make up about a fifth (or more) of the total expected revenue for this year.
Analysts estimate that Tesla will report on the quarter after the markets close on the 22nd of April. The energy business is expected to grow by 25%, surpassing a 12% increase in automotive revenue as well as a 23% rise in services. Cash burn or negative?cashflow is expected to reach $1.44 billion.
No More Side Business
Tesla's valuation of $1.5 trillion is based on products which do not yet exist. This includes robots and self-driving vehicles.
Even so, the quarterly sales of?the energy sector remain uneven.
Matt Britzman is a senior equity analyst at Hargreaves Lansdown and personally owns Tesla stock.
Energy?storage deployments in the first quarter 2026 were 8,8 gigawatt hours, a 15% drop from a year ago. Tesla is expected to increase revenue in the segment as it focuses on more profitable products.
Scott?Acheychek is the COO at REX Financial, an ETF issuer.
Investors want to know how the energy sector is responding to challenges across the industry. Morgan Stanley analysts stated that while growth will likely continue to be strong beyond the first quarter, margins could come under pressure because of pricing competition and delays to pass on higher tariff costs.
(source: Reuters)
