Tesla, the renowned electric vehicle manufacturer, announced its first annual profit decline since 2017 in its fourth-quarter and full-year earnings report, released on Wednesday. The news sent shockwaves through the market, causing Tesla’s stock to take a significant hit. Despite facing challenges related to shrinking margins, the company managed to achieve remarkable growth in its top-line revenue.

Throughout 2023, Tesla reported a decline in earnings per share, representing a 23% drop from the previous year’s record-breaking figure. Adjusted earnings before interest, taxes, depreciation, and amortization also experienced a decrease of 13%, totaling $16.6 billion compared to 2022’s $19.2 billion.

However, Tesla’s revenue for the year reached an all-time high of $96.8 billion, showcasing a substantial increase of 19% compared to the prior year. This positive result highlights the company’s ability to generate strong sales figures despite the challenging financial climate.

During the last quarter of 2023, Tesla generated $25.2 billion in sales, with earnings per share amounting to $0.71. While these figures fell slightly short of analyst estimates, they still demonstrate the company’s resilience in a competitive market.

Following the release of the earnings report, Tesla’s stock plummeted by 5%, continuing the downward trend it has experienced in 2024. The decline marks a 16% decrease in the company’s stock value, pushing it to its lowest price since October.

The decline in profits can be attributed to several factors, including a series of price cuts initiated by Tesla on its vehicles. These cuts significantly impacted profit margins, resulting in the lowest gross margin since 2019, reaching 17.6% during Q4. This represents a decrease of over 600 basis points from the previous year.

Despite these challenges, Tesla achieved an outstanding milestone by delivering 1.8 million electric vehicles in 2023, including a record-breaking 484,507 deliveries during the fourth quarter. This equates to a remarkable annualized delivery growth rate of 127% over the past five years. However, investors have expressed concern over Tesla’s ability to convert this impressive sales growth into corresponding profit growth.

Tesla’s recent performance has reflected apprehension among investors due to its lofty valuation. The company’s stock currently sits approximately 50% below its peak in 2021, despite experiencing substantial growth in the previous year. Additionally, Tesla’s CEO and top shareholder, Elon Musk, has drawn attention with his controversial behavior, further impacting market sentiment towards the company.

Source: Forbes