Tesla's best bet for growth has nothing to do with cars or AI

• Tesla's energy business juiced revenue in the second quarter.

• Tesla's growth isn't happening in autos right now.

• But investors say Tesla's immediate financial future still relies on autos.

Tesla has the juice to make it through the electric-vehicle slowdown — literally.

Tesla's energy business was a key revenue driver in the second quarter as EV sales fell and robotaxi initiatives remained as murky as ever.

While Tesla's earnings per share fell short of analysts' expectations from April to June, revenue outpaced expectations, with a record $25.5 billion.

About $3 billion of that came from battery storage units and solar panels sold by its energy business. That's nearly double what that same business unit recorded in the second quarter of 2023.

In a tough start to 2024, Tesla's bright spots have been in areas other than its industry-changing electric-vehicle lineup.

The company has posted two straight quarters of falling vehicle sales, with deliveries down 4.7% in the second quarter. A series of price cuts have eaten away at Tesla's bottom line only a few years after it first posted consistent profits.

That's increased Tesla's reliability in two areas its competitors struggle in (or have no match for): energy generation and regulatory credits, the latter of which generated another $890 million in revenue last quarter. Together, the two accounted for 15% of second-quarter revenue.

Analysts warn, however, that both of these revenue streams can be inconsistent and that Elon Musk's promised future robotaxi business is too far out to trust at this point.

"On earnings updates, the realities of the business fall back to (mostly) auto," Joseph Spak, a UBS analyst, wrote in a note to clients following Tesla's second-quarter earnings report. UBS has a sell rating on Tesla's stock and a 12-month price target of $197 — about 10% lower than where shares were trading Wednesday.

As the investor community reacted to the latest financial results, Tesla's stock was down by nearly 11%.

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