The world’s richest businessman Elon Musk has suffered a major financial setback in a single day. After the huge fall in the shares of Tesla and SpaceX, their total wealth has decreased by about $44.4 billion (about ₹4.2 lakh crore). According to the Bloomberg Billionaires Index, Musk’s total net worth has now dropped to $745 billion. It is noteworthy that just last month Musk was in the headlines due to the possibility of becoming the world’s first trillionaire; However, the company’s quarterly results have now increased the concern of investors.
Tesla announced its April-June quarter results, which showed that revenue was higher than expected. However, the market reacted negatively to the results due to a decline in profits and weak cash flow. Following the announcement, Tesla shares fell nearly 5% during after-market trading, adding to losses incurred during regular trading hours. Tesla shares have fallen about 15% since the beginning of the year.
**Revenue increased, profit decreased**
During the quarter, Tesla’s total revenue was $28.24 billion, up 26% from a year earlier. However, the company’s earnings per share (EPS) came in at $0.33, well below the market’s expectation of $0.51. Meanwhile, the company’s net profit declined 5% to $1.11 billion.
**Margin and cash flow increase concerns**
Despite growth in revenue from the automotive business, gross profit margin fell to 16.8% due to a lower average selling price per vehicle — well below market expectations. The main concern was the company’s negative free cash flow, which saw a decrease of $1.1 billion during the quarter. Additionally, capital expenditure (Capex) more than doubled.
**Rising cost of raw materials a challenge**
According to a senior Tesla executive, the company’s operating costs may increase further in the near future. Higher raw material costs, fluctuating interest rates and heavy investments will put pressure on the company’s costs. This is why investors started booking profits after the quarterly results, which had a direct impact on Elon Musk’s net worth. For now, the market is focusing on how Tesla strengthens its profitability and cash flow in the coming quarters.
