Tesla’s (TSLA) latest earnings call felt a lot less about the numbers and more about the narrative.
Tesla’s enigmatic CEO Elon Musk was swift to turn the spotlight from spreadsheets to strategy, describing the EV giant as standing at a “critical inflection point” where AI starts to reshape everything from cars to factories.
He talked about Robotaxis running on full autonomy, the Optimus robot evolving into a machine that could “perform surgery someday,” and Tesla’s critical role in boosting the nation’s energy grid.
Investors, as usual, were split.
Also, on the fundamentals side, margins tightened, but free cash flow came in hot. The bigger story was the tone, where Musk’s mix of defensiveness and vision hinted at a company that’s willing to trade gingerly for long-term dominance in the tech space.
And then came Dan Ives of Wedbush.
A longtime Tesla bull, Ives effectively used the earnings call as more of a pivot point, not to regurgitate Wall Street’s concerns, but to reframe the conversation entirely.
His post-earnings verdict wasn’t about bottom-line numbers. Instead, Ives’ take hinted that Wall Street may be missing the most important part of Tesla’s long-term investment case.
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Dan Ives says Tesla is the most undervalued AI stock
“The most undervalued AI name.” That’s how top Wedbush analyst Dan Ives feels about Tesla stock after its Q3 earnings.
He said further that the company is on the cusp of a “golden chapter,” reiterating his outperform rating and a $600 price target, sticking to his core thesis that AI and robotics will drive Tesla’s next growth wave.
On CNBC, Ives said “the worst is in the rearview mirror,” while hailing Tesla as a powerful “physical-AI play.”
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In doing so, he projects a whopping $3 trillion market cap for the EV giant within 18 months, which is roughly 80% share of the global autonomy market.
He argues that Tesla’s competitive edge isn’t just in its data, but in deploying AI at physical scale, from cars to robots to energy systems.
Unlike cloud-based AI leaders running large language models (LLMs) on servers, Tesla deploys AI inference directly into its products, with millions of cars already collecting and learning from real-world driving data.
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Those edge models continue feeding into Tesla’s proprietary AI training systems, closing the gap between software learning and physical execution.
Also, it’s important to note that Ives has grouped Tesla and Nvidia as “the two best physical-AI plays,” companies that efficiently layer custom hardware with neural networks to turn intelligence into tangible results.
Tesla’s AI monetization roadmap is where Ives sees the unlocking of long-term value.
He pointed to a growing FSD user base, a growing Robotaxi network (nearly 10 U.S. cities by year’s end), and Optimus moving from factory work to commercial use.
Nevertheless, it’s important to note that Tesla’s stock pricing metrics suggest otherwise.
Tesla stock trades at 15.3 times TTM sales (and 15.6 times forward estimates), about 26% to 49% above its 5-year averages. Likewise, its p/e ratio is stretched (262x forward non-GAAP earnings versus 114x 5-year average).
Quick takeaways:
- Dan Ives doubles down on Tesla as “the most undervalued AI name,” reiterating his bullish thesis and leaving a Street-high $600 price target intact.
- He calls Tesla a “physical-AI play” that makes use of real-world data from millions of cars to train and deploy autonomous systems.
- Ives sees AI monetization driving the next leg, with Robotaxis in 10 cities, expanding FSD base, and Optimus robots moving toward commercialization.
Tesla’s Q3 shows record sales but margin pressure
Tesla’s Q3 delivered a mix of highs and headwinds.
The EV pioneer posted sales of $28.1 billion, up 11.6% year over year, crushing estimates by $1.39 billion. Also, its non-GAAP EPS came in at $0.50, missing consensus estimates by $0.06 and down from $0.62 a year earlier.
Deliveries came in at a record 497,099 vehicles, up from 462,890 in Q3 2024, with production at 447,450 units.
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In addition, demand surged ahead of the expiration of the $7,500 federal tax credit, driving volumes higher even as its profit margins narrowed. Tesla’s operating margin dropped to 5.8%, nearly 50% the 10.8% level of a year ago, while gross margins slipped to 18%, compared with 19.8% last year.
However, Tesla’s free cash flow jumped to a whopping $3.99 billion, on the back of stronger working-capital efficiency and steady capex discipline.
Looking ahead, Tesla guided cautiously, sounding the alarm on “near-term uncertainty from shifting trade, tariff, and fiscal policy.”
The EV giant still expects hardware profits to be increasingly linked to AI, software, and fleet-based earnings, highlighting a long-term shift from manufacturing toward monetizing autonomy and robotics.
In doing so, Musk also teased Optimus V3, which is set to be revealed in early 2026, saying, “It won’t seem like a robot but a human in a suit.”
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