Tesla’s quarterly energy storage deployments fell 15% while revenues for its energy division dropped 12% year-over-year from Q1 2025 to Q1 2026.
The US electric vehicle (EV), energy storage and increasingly AI-focused tech company reported its latest quarterly results yesterday (22 April). Tesla deployed 8.8GWh of energy storage systems during the first quarter of this year, down 38% from its personal best of 14.2GWh in Q4 2025 and 15% less than 10.4GWh of deployments recorded in the first quarter of 2025.
Meanwhile, energy generation and storage revenue, which includes a small contribution from its solar PV business, was US$2,408,000,000 for the quarter, which was a similar sequential decline of 37% from just over US$3.8 billion in the previous quarter and a 12% decline from US$2.7 billion a year previously.
However, although the company has yet to file its Form 10-Q for the quarter with the US SEC, meaning its margins for the division have not yet been disclosed, CFO Vaibhav Taneja said in an earnings call that Tesla set a quarterly gross margin record for its energy business at more than 39.5%.
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In one of the few mentions of energy storage in an earnings call that largely focused on Tesla’s AI, robotics and autonomous driving investments, Taneja said 2026 energy storage deployments are expected to be higher than last year’s.
The company deployed a total of 31.4GWh of mostly utility-scale battery energy storage systems (BESS) in 2025, more than 10x the 3GWh it reported just five years earlier in 2020.
This far outweighed automotive margins, which, excluding tax credits, were at 19.2% and contributed to a total GAAP gross margin on 21.1% for the quarter, up 5% from 20.1% in Q4 2025 and almost 30% higher year-over-year than the 16.3% recorded in Q1 2025.
Taneja reiterated a statement from previous quarters that energy storage deployments tend to be “lumpy” quarter-on-quarter, as well as a prior assertion that margin compression is expected due to the dual headwinds of increased market competition and tariffs.
“As previously discussed, tariffs in this business can have outsized impacts, as most of the battery cells are procured from China.”
In addition to the ongoing uncertainty over US import tariffs on Chinese batteries, the foreign entity of concern (FEOC) restrictions to investment tax credit (ITC) eligibility introduced in last year’s ‘One Big Beautiful Bill Act’ (‘OBBBA’), along with domestic content bonuses, have seen energy storage players scrambling for US-made cells.
Although Tesla had also previously said in October 2025 that it would begin in-house lithium iron phosphate (LFP) cell production in the US before the end of that year, there was no update in the earnings call or investor materials to that effect.
The company’s LFP supply deal in the US with LG Energy Solution was confirmed in March at a value of US$4.3 billion, after rumours a few months before, while there were also unconfirmed reports toward the end of last year of another deal with Samsung SDI. The two South Korea-headquartered OEMs are among the few that are active in the US with LFP production of BESS cells on-stream that meet the FEOC requirements.
Houston Megafactory included in US$25 billion Capex spend over two years
In the second earnings call since CEO, Elon Musk, announced a change in Tesla’s mission statement from ‘accelerating the world’s transition to sustainable energy’ to ‘amazing abundance,’ the company co-founder and self-styled ‘Technoking’ said demand for the Megapack grid-scale BESS product line is “very strong,” and that the company was “excited to begin production of Megapack 3 later this year in our new world-class factory outside Houston.”
The third-generation Megapack is designed for integration into the new Megablock configuration, which includes integrated transformer hardware and allows multiple units to connect in a single cluster up to 20MWh of capacity.
Tesla’s third so-called Megafactory joins its California facility, which has already ramped to its planned 40GWh annual production capacity and the company’s site in Shanghai, China, which is currently at 20GWh annual capacity but also intended for ramp-up to the same size as its counterpart in the US.
Meanwhile, the Powerwall residential product continues to be produced at the original Nevada Gigafactory, with an annual production capacity of around 6GWh, according to an investor deck.
The factory in Texas is one of six the company is investing in currently across its business lines. Alongside robotics and AI chip research investments, CFO Taneja said Tesla expects to spend US$25 billion in Capex across the 2025-2026 timeframe.
