Tesla’s energy storage business saved a dismal earnings report from becoming a nightmare.
Last year, the company’s profit down 45% compared to 2024led in large part by falling sales of its electric vehicles. Investors anticipated a drop in sales, but Tesla still beat Wall Street earnings and revenue estimates due to its energy storage business.
Tesla plans to deploy a record 46.7 gigawatt-hours of energy storage products by 2025, a 48% increase from last year, according to the company’s official filing.
Large stationary batteries like the Megapack and Powerwall, along with solar installations, now drive nearly a quarter of Tesla’s gross profit. Last quarter alone, Megapack contributed $1.1 billion from its storage business to $3.8 billion in gross profit for the entire year. Storage and energy revenue rose 26.5% to $12.8 billion.
Its batteries and solar panels are also very profitable, with a gross margin of 29.8%, almost double that of Tesla selling cars and trucks.
Storage will also play a bigger role in the company’s future.
Large energy storage projects, such as those installed for utilities or data centers, tend to be based on milestones, and revenue from the project is recognized when certain milestones are achieved. In its 10-K filing with the SEC, Tesla said it will recognize $4.96 billion this year in deferred revenue from projects it has completed. It is more than double what the company admitted in the delayed result of the storage project in 2025.
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Some obstacles lie ahead, though.
The One Big Beautiful Bill (OBBBA) eliminates tax credits for home energy storage systems like Powerwall, although commercial tax credits for Megapack and Megablock products will continue until the mid-2030s. Tariffs and provisions in the OBBBA also threaten to increase the prices of battery cells, said the company. Sales increased due to increased volume, but the average selling price of Megapacks decreased, indicating increased competition in the energy storage market.
But overall, Tesla remains optimistic about the storage business.
“Despite these challenges, as AI infrastructure drives rapid load growth, we can see opportunities for energy storage products to stabilize the grid, switch energy when it’s most needed and provide additional power capacity,” the company said in its earnings report.