SHOCKING Q2 Tesla Earnings Breakdown (Summary)

Well, Tesla numbers are out and there

are some really interesting details

baked into the numbers that we've got to

talk about, including recognizing $320

million of crypto gains that you're

recasting from 2024 and some talk about

the affordable model, but very little

talk about ZEV credits. Going into this

earnings call, I was most interested,

which we can still get from the earnings

call and hearing what Elon Musk and

Tesla's commentary is regarding zero

emission vehicle tax credits. That's

because in this quarter, we had a 15%

gross margin excluding tax credits,

which is great, but we still had $435

of zero emission vehicle credits that

came in. That's because the big

beautiful bill passed July 4th, which is

technically the beginning of the third

quarter, which is to say that Tesla did

get the benefit of zero emission vehicle

tax credits for the entire full quarter,

and those were represented in the

earnings here. Now, most long-term Tesla

investors don't really care about these

credits, and they look at these credits

as something that was bound to go away

at some point in the future. Anyway, the

question just becomes, what is Tesla

going to go through in the way of a hole

while we wait for revenues to appear for

robo taxis and the Optimus robot? Those

are uncertain revenues. And so, of

course, the big question now is what do

we go through? I'll draw that out for

you as we go through some of these

numbers. So, if we have sort of peak

vehicle deliveries here, and then what

happens? We push this down with the loss

of zero emission vehicle tax credits. We

lose the demand incentive of the $7,500

vehicle tax credit or you know the 4K

used tax credit as well as the home

residential energy tax credits. We push

down our EPS for the corporation. This

is the whole. But is this not what most

long-term investors in Tesla looking

forward to? What we're hoping for is

that we can actually push this up with

the benefit of a Model 2 or a Model Q,

some form of increase to promote or push

up this hole, at least until we get to

what, you know, most of us think will be

this long-term giant rocket ship of the

Optimus uh program uh and then obviously

robo taxi. That's the goal. That's the

simple goal for Tesla. The issue that we

find is we don't have a lot of clarity

on this Model 2. We only have a leak

from UBS which suggests the Model 2 is

actually going to be a Model Q and it

will only be for the Chinese market. For

example, here we could see Tesla says we

continue to expand our vehicle offering

including our first builds of a more

affordable model in June. Okay. With

volume production planned for the second

half of the year. The issue with this is

the only indication we have of really a

new model is the potential model Q which

would only be dedicated for the Chinese

market which is really an electric

vehicle market that was set up by Tesla

and is now being competed against uh you

know in other words the Chinese auto

manufacturers are directly with the

support of their government competing

against Tesla which kind of sucks but it

is what it is. Tesla got a great head

start over there and it was obviously I

mean Shanghai was a gamecher for Tesla

especially in terms of global deliveries

and expansion of Tesla brand. The

broader issue that we have is in the

financials during this little hole that

we're going through right this whole

period right here. We don't know what

point this is. This point is a question

mark. We hope it's 2027 2028 cyber tabs

uh robo taxis whatever but we don't

know. That's an uncertain future. And

then here we are, you know, you could

argue 2425

where we have this uncertainty in terms

of deliveries and we kind of just have

to hold our breath between this hole.

The concern you want to pay attention to

is right here. $320 million. This is a

$320 million income addition. And the

footnote says that this was as a result

of the new adoption of the crypto asset

standards which basically allows them to

now indicate that rather than only

recognizing losses, they can also

recognize income. So they basically went

back changed some of their financials to

follow the law, which is fine, but it

did give them a $300 million cash gain.

And that's because crypto assets could

be considered part of their cash

balance, which they've got plenty of.

The issue with that is when you look at

their cash flow, their free cash flow

missed substantially. We only had $145

million of free cash flow. The

expectation was somewhere around $750

million of free cash flow. And if you

remove that $320 million gain, you would

have actually had a negative free cash

flow read here. And that's only from

that $320 million number. If you now

also remove the zero emission tax

credits at $435 million, yes, we would

be substantially smaller on the net

income level, we would be about half of

the net income we had now. In fact, our

net income now is about 1172, so $1.1

billion. Our net income would have

fallen to about $611 million. So, this

is what I talk about when I talk about

the hole. I'm not saying that this is

bearish for Tesla forever. I'm just

saying it's going through a hole. And

what you really want to look for are

insights from Elon Musk's, you know,

point of view and his team that are

saying, "Hey, here's what we're doing to

get through that hole. We're releasing

more affordable models there. We're

expecting a model 2 in the US or

whatever." That would be great.

Unfortunately, really, when we talk

about new models, what we find is that

the current models are increasing in

inventory. Inventory now at 24 days, up

from an average of 22 in Q1, the highest

in several quarters, frankly. Uh, in

addition to that, the vehicle that drove

itself to a customer's home did have a

custom software stack in Austin, which a

lot of people looked at that and like,

okay, well, we want this to be in sort

of the broader release. Did it have

different hardware? We don't know

details on this, but this will be a

future. I'm excited about that. It'll

kill finally hopefully that $900

delivery fee or give Tesla some more

profit. So, I mean, that's cool. Uh,

then test drives up 20%. And I thought

that was interesting because it could be

an indicator that Elon Musk getting out

of politics like that negative political

weight is starting to fade. But going

back to the models, when we talk about

launching additional models, we still

really only find that when they say we

continue to make progress preparing for

the launch of additional models this

year. Our entire lineup is better with

recent updates. You know, yes, we got

the extended Model Y in length. We got

the H Juniper model, but we still don't

have a new model. They continue to tease

this new model, but again, per UBS, we

think that's going to be China only. If

you look at Superchargers, you're going

to find Supercharger growth is really

starting to shrink 14 to 18%. Not ideal.

Tesla, though, relatively stable so far.

Earnings call could obviously sway this

dramatically, but markets were

anticipating about a 5% below average

volatility move on Tesla. So that we're

hanging out here between this sort of

347 line and 318 line. Usually we got to

move towards one. If they pull off this

earnings call, well, hopefully this will

just be a clearing event and Tesla can

move nicely back to its 347 level.

That's the goal for Tesla. Now, keep in

mind, I I mean, you know me, I'm a big

fan of the lines. And uh this morning

for example, we talked a lot about

Rocket Mortgage because people were

looking for the next meme name after

Openoro, which I cautioned against

investing in Open the last two days

because I said the rally was over and it

is fizzling like crazy. People were

looking at Openoro and I said, "Hey,

this sucker is probably going to bounce

at 1598.

Don't do anything pre-market. Wait to

see if you get volume." This is in the

Meet Kevin Alpha report. We do it in the

pre-market. So, when we look at Euphoria

like this, we could look at a stock and

I give you my thoughts on how it might

move on the day. If you want to get

access to that, make sure you go to meet

Kevin.com, use the coupon code release

the files or AIB boom. Uh, they both

work. But, uh, you can see this

incredible bounce here basically five

times on the day on the exact line that

I talked about in pre-market. So, that's

one of the big benefits of the alpha

report is you kind of get a heads up on

what to expect for the trading day, what

lines to look for, and then my goal is

to teach you, hey, look for volume to

know if these bounces are actually going

to hold. That's the whole point of the

alpha report. So, make sure you get that

at me.com. Going back to the Tesla Q2

report, we find that we also have this

decline in energy generation and storage

revenue. Now, this I found very

interesting. To me, there's a bit of a

price war going on in solar, mostly

because energy prices are coming down.

Whether that's because we're producing

more oil and natural gas, or it's

because of lower international demand

because of tariffs or in spite of

tariffs, whatever, uh we're seeing

energy prices come down. And in order

for the home, battery, and solar market

to do well, you need tax incentives, you

need high utility rates, and you need

low interest rates to finance these

projects. Unfortunately, we have the

complete opposite. We have very high

interest rates, not low interest rates.

We have falling utility rates, not

rising utility rates. And we're losing

tax incentives for these batteries and

home solar products, which is

unfortunately an L that's leading

companies like Tesla and Nphase, now

reportedly making cheaper products to

still try to maintain some margin. And

this is where Tesla actually

impressively increased their margins but

lowered their average selling prices on

these energy products to get them sold.

Now, the NPHES earnings call will give

you a lot more insights into why this

industry like the solar and battery

industry is just a toxic waste basket

right now. And it's one really at this

moment unfortunately to be very very

cautious of. You really have to have

balls of steel to make a bet on the

solar industry uh right now. But it is

still impressive that Tesla's able to

squeeze those margins. And I like that

Tesla's able to push a 15% margin

excluding those credits. Now, we still

got development listed here for the

Roadster. We've got the Tesla Cyber

Semi-truck in construction along with

the Cyber Cab. So, the lines in in

construction here. You don't see a new

model otherwise listed here. and they

still indicate a Cybert truck capacity

of over 125,000,

but it's highly unlikely we're anywhere

near that sort of uh delivery volume.

So, yes, a miss today. We did have some

cool images. Look at all these ladies,

these pretty ladies here uh on their

roller skates showing off uh their uh uh

you know, 1950s style diner. Uh the uh

yeah, we've got the hole that we've

talked about. We talked about uh oh, I

don't know if we've hit this yet. Tesla

is cashrich right now. While XAI is

blowing money, expected to blow about 13

billion this year. One of the reasons

Elon Musk is promoting this idea of

Tesla potentially taking a stake in XAI

is because Tesla is pretty cash rich

right now. Even if you net out their uh

their their current liabilities of 26.8

8 billion of bills to pay. They still

have about 10 billion of extra cash plus

another almost 14 billion uh hold on

sorry that was $3.8 billion of accounts

receivable. So that's about $40 billion

of cash plus 14 billion of inventory. So

40 billion of cash plus 14 of inventory.

You're doing really well here in terms

of cash, a cash cash situation. If

you've only got $26 billion of current

liabilities and 11.5 total long-term

liabilities, you could literally take

all the cash you have and make this

company debtree. And then you could go

do the debt scream,

debtree scream, whatever you want to do.

Anyh who, uh, this a little funky again

with the 320. We've talked about that,

but that gives you like an overview of

what's going on with the Tesla numbers

here. And remember to go to meet

Kevin.com and use those uh the release

the files coupon code.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Pra there, financial analyst and

YouTuber. Meet Kevin. Always great to

get your take.