Tesla Plans To Record ~$1 Billion In FSD-Related Deferred Revenue Over The Next 12 Months

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Tesla's recent Cybercab reveal event on the 10th of October has revitalized the uptake of its subscription-only Full Self-Driving (FSD) software package. Now, as per the tabulations by an active Wall Street player, the EV giant is on course to recognize nearly $1 billion in FSD-related deferred revenue over the next year.

As we noted recently, in light of the new FSD capabilities that Tesla rolled out over the past few weeks, including the smart summon and auto-park features, the EV giant recognized $326 million of its FSD-related deferred revenue in the just-concluded quarter.

TESLA $TSLA reiterated at 'Overweight' at Piper Sandler with a $315 price-target:

"We are publishing one final supplementary report related to Q3 earnings. FSD revenue is highly margin accretive, and it's an increasingly important driver of company-wide gross margin, but since…

— Stock Talk (@stocktalkweekly) October 29, 2024

Now, in its final take on Tesla's Q3 earnings, Piper Sandler has noted:

"FSD revenue is highly margin accretive, and it's an increasingly important driver of company-wide gross margin ..."

In opposition to the prevailing convention, Piper Sandler analysts oppose the exclusion of deferred FSD-related revenue recognition - as a largely one-time item - from the quarter's gross margin calculation. Instead, the analysts contend that the recognition of deferred revenue will be a recurring theme for Tesla over the next few months, given the Cybertruck's "very high FSD take-rates" and the fact that, in the coming quarters, "this vehicle will represent a rising percentage of Tesla's overall mix."

As the crème de la crème of this investment note, Piper Sandler predicts:

"And in any case, Tesla still expects to unlock > $800M of deferred revenue in the coming 12 months (or >$200M/quarter)."

Bear in mind that Tesla's auto gross margin (ex-Regulatory Credits) printed at 17.05 percent for the just-concluded quarter against expectations of 14.90 percent. According to the Bank of America (BofA), this upside was primarily driven by "volume leverage, lower raws, freight, duties, and FSD."

Meanwhile, as per a very pertinent thread by AJ on X, Cybertruck achieved a positive gross margin for the first time in Q3, and this trend is only set to accelerate going forward.

What's more, as per AJ's calculations, Tesla's increasing FSD uptake will improve its auto gross margin (ex-credits and leasing) in Q4 by 0.3 percent to 16.7 percent.

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