Tesla’s energy storage business saved a dismal earnings report from turning into an abomination.
Last year, the company’s profits fell 45% compared to 2024 due to falling sales of its electric vehicles. Investors had expected sales to decline, but Tesla still beat Wall Street’s earnings and revenue estimates thanks to its energy storage business.
Tesla has deployed a record 46.7 gigawatt-hours of energy storage products by 2025, up 48% from last year, according to company filings.
Large, fixed 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 to the storage business’ $3.8 billion in gross profit for the full year. Energy storage and generation revenue rose 26.5% to $12.8 billion.
Those batteries and solar panels are also very profitable, with a gross margin of 29.8%, nearly double what Tesla earns from selling cars and trucks.
Storage will likely play a bigger role in the company’s near future as well.
Large energy storage projects, such as those installed for utilities or data centers, tend to be milestone-based, and revenue from the projects is recognized when certain milestones are met. In its 10-K filing with the SEC, Tesla said it expects to recognize $4.96 billion this year in deferred revenue from projects already underway. That’s more than double what the company recognized in deferred revenue from storage projects in 2025.
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Some obstacles exist, however.
The One Big Beautiful Bill (OBBBA) phased out tax credits for home energy storage systems like the 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 drive up battery prices, the company said. Sales increased because volumes increased, but the average selling price of a Megapack was down, indicating increased competition in the energy storage market.
Overall, however, Tesla remains bullish on the storage business.
“Despite these challenges, as AI infrastructure drives rapid load growth, we see opportunities for energy storage products to stabilize the grid, transfer energy when it’s needed most, and provide additional energy capacity,” the company said in its earnings report.
