Tesla's (TSLA.US) Q3 earnings report "return of the strong" after FSD transformation, can it continue to open up imagination space

Tesla (TSLA.US) released its Q3 earnings after the US market closed on Wednesday, leaving investors impressed with its profitability. The data showed that the gross margin of the automotive business, excluding "selling carbon" revenue, rose to 17.1%, easily topping the market's expectation of 15.1%; the operating margin was 10.8%, an improvement from the previous quarter's 6.3% and higher than the previous year's 7.6%. Tesla CEO Elon Musk said on the earnings call that the company would produce more affordable models in the first half of 2025. He expects the car production to grow 20% to 30% by 2025 and expects a significant expansion of Cybertruck production in 2026. In the autonomous driving business, Tesla believes that the driving safety of FSD will exceed human driving levels by the second quarter of 2025. The ride-hailing service is expected to launch in Texas and California next year. When asked if Tesla would launch a $25,000 affordable car, Musk said that the future of Tesla is autonomous driving. This means that Model2 will not be like a regular car and may not have a steering wheel. Garrett Nelson, an analyst at CFRA, reminded investors that expectations for the Q3 earnings were low after four consecutive quarters of earnings misses and the disappointment of Robotaxi Day. Nelson said the key question was the sustainability of Tesla's Q3 gross margin. He also believed that the consensus expectation of nearly 80% growth in EPS from 2024 to 2026 was unrealistic. Wedbush Securities was as optimistic as usual. Analyst Dan Ives said that with the price cuts fully in the past, Tesla showed its ability to expand its margin as the company continues to transform into AI/FSD in the next few years. Victor Dergunov, head of investment team at The Financial Prophet, said the most important takeaway was that the improvement in Tesla's profitability exceeded expectations, which was the main focus of the report. In addition, the solid EPS performance means that Tesla's profitability may continue to exceed expectations. After the earnings release, Tesla's stock rose 12.1% after hours to $239.50.