Bull v Bear: Tesla stock is at a crossroads ahead of Q1 earnings

Tesla reports Q1 earnings after the close Wednesday and it comes at an interesting point for the shares, a potential inflection point after the stock broke out of a multi-month descending channel lately after the company confirmed its AI chip design was ready.

Analysts anticipate EPS of $0.36 on $22.3bn in revenue. 2026 estimates for EPS stand around $1.90, down from more than $3 a year ago. 

Now Tesla is at a crossroads as the bulls and bears are haggling over just how robust the AI, robotics and autonomous roadmap looks.

The focus is as usual on EV deliveries, margins and updates on initiatives such as FSD and robotaxis, humanoid robots and AI, albeit the main number to watch may not be EPS but the incremental capex spend after the company signifcantly raised its spending plans last quarter, and any updates on the Terafab plant – Tesla's planned 1-terwatt AI compute facility. Competition in China and rising raw material costs are likely to weigh on margins.

Inventory build worries: On 2 April Tesla reported 358,023 vehicle deliveries in Q1, short of expectations and a sharp decline from Q4 2025. The figure was also about 50k short of production numbers, signalling demand issues that we know are a problem – Europe has turned its back on Tesla to a large extent, while Chinese competition is winning. Investors will be watching what if anything the company has to say about demand and the inventory build, which is likely to only further weigh on margins.

Tesla’s valuation is increasingly built on AI and robots, not on core EV sales. Elon Musk’s job on the earnings call today is to sell the future and bridge the gap between the headline-grabbing vision for Tesla versus the reality on the ground, which could see concerns about funding surface. Tesla plans to spend about $20bn this year on capex – new factories, AI buildout, autonomous driving. Investors may worry that negative free cash flow hits $1.8bn this quarter and may get worse - above $8bn in negative free cash this year. So for the stock performance it’s important that Musk does enough to help investors digest some of these large numbers, particularly if the capex guide is raised, which seems likely. The problem is that Tesla hasn’t really offered an ROI from all these spending plans and it doesn’t have the EV margins and free cash to support in the same way as before.

FSD: Tesla is poised to hit 10 million miles driven on its FSD driver assistance tech but with free cash turning negative investors will want evidence that fully unsupervised autonomous driving is near at hand. Musk has consistently over-promised and under-delivered on this front to date. A failure to match investors’ rosy expectations for FSD growth this year would be a negative for the stock in the near-term.

Robotaxi scalability is another major issue with investors seemingly more optimistic than the rollout has been swift. Tesla has just announced the expansion of Robotaxis to two new cities, but the rollout seems painfully slow to many. Morgan Stanley analysts point out that the accelerated deployment of Robotaxi services is “critical” to supporting the high valuation. UBS has warned it fails to see “meaningful scalability" in target cities.

Terafab: the $20bn capex guidance for the year explicitly excluded the Terafab chip factory and solar energy plans. Tesla in March unveiled its Terafab ambitions – to build a chip manufacturing base capable of delivering 1 terawatt of computing power annually. The costs of this build-out would be in the trillions of dollars not billions, specific numbers are difficult to ascertain but $5tn-$13tn is being talked about. Any further details on these plans will be closely scrutinised - specifically near-term spending implications from any initial chip production plans. As for solar energy Tesla plans to produce 100 gigawatts of of capacity by 2028. Estimates for this suggest about $30bn in additional spend. 

TSLA: The stock is down about 10% since its last earnings report three months ago, and –23% since the December high. However, they have lately broken free from the multi-month descending channel and are showing signs of life once more. Resistance seems to be offered by the 200-day SMA and 38.2% Fibonacci retracement level at just shy of the $400 round number, an area which has previously acted as a strong support level.