Tesla surprised analysts by posting a profit in Q4 despite a 61% decline in profits. Automotive revenue exceeded expectations, with margins improving. Capital expenses are expected to skyrocket this year. Despite a decline in year-over-year revenue, Tesla managed to stay profitable due to key surprises in sales and margins.

Tesla’s Q4 vehicle deliveries only dropped by 15.6% year-over-year, leading to impressive revenue. Margins improved, even with the introduction of lower-priced models. Demand in smaller countries boosted sales, defying expectations. Tesla’s total Q4 revenue was down only 3% from the previous year.

Tesla’s gross profit margin actually increased in Q4, contrary to predictions. Automotive margins improved, offsetting declines in other segments. The company made more profits from cheaper models. However, Tesla warned of margin compression later this year.

Tesla’s Q4 capital expenditures only slightly increased, but 2026 is expected to see a significant rise in spending. The company plans to invest more than $20 billion this year on various projects. With increased capex and potential margin declines, Tesla may face unprofitability in the near future.

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Read more at Nasdaq: I Predicted Tesla Would Be Unprofitable. I Was Dead Wrong. Here’s How Elon Musk Surprised Me.