Forget the Recent Delivery Beat: Here's the Key Number That Will Decide Investors' Reaction to Tesla's Earnings

Tesla's latest earnings report saw a significant increase in vehicle deliveries, with 486,532 vehicles delivered in the third quarter, surpassing Wall Street's expectations. However, this positive news is not without its caveats. The same pattern of strong deliveries leading to a disappointing earnings report was seen in the second quarter, which has raised concerns about the company's ability to maintain profitable margins.

The key metric to watch in Tesla's upcoming earnings report will likely be its gross margin, specifically the automotive gross margin excluding regulatory credits. This is because regulatory credits are variable and cannot be treated as a consistent run-rate item, making them less reliable for assessing long-term profitability. The historical data suggests a concerning trend of declining margins, which could be particularly troubling given Tesla's current negative free cash flow situation.

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