Tesla just released Q1 results and the headline is a clean beat on the bottom line, with a revenue miss that nobody is going to care about. Here’s the scorecard:

• Adjusted EPS: $0.41 vs. $0.34 expected — a 21% beat
• GAAP EPS: $0.13 vs. $0.12 a year ago
• Revenue: $22.39B vs. $22.64B expected — a slight miss, but still +16% y/y
• GAAP gross margin: 21.1% vs. 17.7% expected — the number of the quarter

That gross margin print is the eye-popper. Auto gross margin ex-credits came in at 19.2%, up from 12.5% a year ago and 17.9% in Q4. That is a massive sequential move and it’s where the EPS beat came from. But here’s where you need to squint.

How they beat — and why to be cautious

Dig into Tesla’s own Y/Y walk and the story gets murkier. Operating income of $941M (+136% YoY) was helped by:

• “Increase in automotive one-time benefits related to warranty and tariffs” — listed as the #1 positive driver
• “Increase in energy one-time benefits related to tariffs” — another one-timer that could be $300-$500m alone (there should be something on the call)
• Positive FX impact of $0.2B on operating income, $0.9B on revenue

Strip out the one-time warranty/tariff benefits and FX tailwind, and the underlying margin story is less heroic than the headline suggests, amye 14-17% but still much better than 12.5% a year ago. If you strip it out, you could argue EPS was in-line. Regulatory credits also fell to $380M from $595M a year ago — credit revenue as a share of auto gross margin dropped to 1.9% from 3.7%, meaning the underlying auto business is genuinely more profitable, just not as profitable as the GAAP print implies.

The ugly bits

• Energy revenue: $2.41B, -12% YoY — storage deployed 8.8 GWh, worst quarter in over a year after the record 14.2 GWh in Q4. That’s a real demand question but was outlined in the deliveries number.
• Inventory ballooned $2.26B in the quarter — days of supply jumped to 27 from 15 in Q4. They built cars they didn’t sell.
• R&D +38% YoY to $1.95B, SG&A +47% to $1.83B — the AI/Robotaxi/Optimus spend ramp is real and accelerating
• $2.0B SpaceX equity investment hit the cash flow statement. Free cash flow of $1.44B held up anyway.
• Days payable outstanding jumped to 71 from 61 in Q4
• Inventory grew $2.26B
• Net income of $491M was the lowest in two years outside of Q1 2025

The bull food

Active FSD subscriptions hit 1.28M, up 51% y/y. Paid Robotaxi miles nearly doubled sequentially. Cybercab and Tesla Semi in pilot production, volume production guided for this year. The company said preparations for the first large-scale Optimus factory will begin in Q2.

Stock is going to trade on the call, not the print. Margin beat gets the initial pop; the one-time benefits disclosure and inventory build are what short sellers will hammer on. Watch the 4:30pm ET Q&A.