Tag: Stock pick

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

A start-up artificial intelligence company is making headlines today after announcing deals with two of the world’s largest tech companies. Anthropic is securing $5 billion from Microsoft (NASDAQ: MSFT), while leading chipmaker Nvidia (NASDAQ: NVDA) is investing $10 billion in the latest deals to fuel AI’s rapid expansion.

Both companies have high hopes that the deals with Anthropic, an AI research company valued at over $180 billion, will strengthen their market-leading positions. But which stock is the better buy following these transactions?

About the deals

The partnerships among the three companies were announced in a blog post on Nov. 18. In short, Anthropic will scale up its Claude AI model on Microsoft’s cloud computing platform, Azure, and it will use Nvidia’s Blackwell and Rubin semiconductors to provide the compute power.

It’s the first partnership between Anthropic and Nvidia, the world’s leading producer of data center graphics processing units (GPUs) required for training and running high-performance AI programs. The companies said that Nvidia and Anthropic will collaborate on design and engineering to optimize Anthropic’s AI models.

Anthropic’s deal with Microsoft will make the AI company’s Claude large language model (LLM) available to Microsoft Foundry customers, and will make Cloud the only frontier LLM available on the three leading cloud services – Microsoft Azure, Amazon Web Services, and Alphabet‘s Google Cloud.

Anthropic is committed to purchasing $30 billion in Azure compute capacity and will have a contract for additional compute capacity of up to 1 gigawatt. 

Which stock is better after the Anthropic deal?

While both benefit, I think there’s a clear winner here. However, first, it’s essential to examine some background information.

Microsoft was one of the early investors in OpenAI, the creator of ChatGPT, but the nature of that relationship is evolving. Last month, OpenAI announced it struck a deal with Microsoft that allows the company to restructure and frees it from giving Microsoft rights over OpenAI’s work in exchange for cloud computing services. Microsoft still has a 27% stake in OpenAI, but the private company will now have greater control over its business operations.

Anthropic was founded by a former OpenAI executive and emphasizes AI safety, transparency, and research, in contrast to OpenAI’s focus on general advancement and accessibility.

Make no mistake — OpenAI and Anthropic will be competitors for a long time. Microsoft is working with both of them and hopes both will continue to grow. However, if Anthropic begins cutting too severely into ChatGPT’s market share, Microsoft’s $135 billion investment in OpenAI could be at risk.

Nvidia, however, has no such conflicts. OpenAI and Anthropic both rely heavily on its GPUs, and as both companies expand their products, they will need more computing power and more support from Nvidia.

I like both Microsoft and Nvidia. But if you’re picking a winner in today’s news, my money’s on Nvidia stock. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia and Microsoft land a multibillion-dollar Anthropic partnership. Which stock benefits most? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Patrick Sanders has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The market has taken a beating this month as volatility surged, interest rate uncertainty spooked investors, and tech valuations came under pressure. While that kind of pullback can feel unsettling, it often creates some of the best opportunities long-term investors will see all year.

Several high-quality Australian stocks have been dragged down with the broader market. And for patient investors, that combination of temporary weakness can be a gift.

With that in mind, here are three outstanding Australian stocks that analysts think look compelling after the recent selloff.

CSL Ltd (ASX: CSL)

CSL was for a long time one of the most reliable long-term compounders on the Australian share market. However, its shares have been hit hard over the past year due to concerns around margin recovery, restructuring costs, and uncertainty surrounding the planned Seqirus demerger.

But zoom out, and the long-term investment case remains extremely strong. CSL’s core plasma business is benefiting from growing collections, improving efficiencies, and rising global demand for critical therapies. The biotech company continues to invest heavily in its pipeline, with new treatments and market expansions expected to support earnings over the decade ahead.

Importantly, CSL’s valuation has become materially more attractive. For example, Macquarie Group Ltd (ASX: MQG) currently has an outperform rating and $275.20 price target on its shares. This implies potential upside of more than 50% from current levels.

NextDC Ltd (ASX: NXT)

Another Australian stock that has fallen heavily from its highs is NextDC.

It has been caught up in the tech-led market pullback, despite its exceptional underlying momentum. The company continues to expand aggressively to meet soaring demand for data storage, cloud services, and high-performance computing. These are structural trends that remain in their early innings.

With hyperscale customers scaling up AI workloads and enterprises shifting more operations into the cloud, NextDC is positioned squarely at the centre of one of the most powerful megatrends of the next decade. Its pipeline of new facilities, long-term contracted revenue, and high customer stickiness give the business a remarkable degree of predictability.

Macquarie also recently put an outperform rating on this stock with a $20.90 price target. This suggests that upside of over 50% is possible over the next 12 months.

TechnologyOne Ltd (ASX: TNE)

Finally, TechnologyOne’s share price crash this week has come despite the company delivering another year of record profit, record ARR, and strong cashflow. The market’s reaction appears more about valuation resets and profit-taking than any deterioration in fundamentals.

The core business remains in excellent shape. TechnologyOne continues to win new customers across government, education, and corporate markets, while its SaaS+ model is transforming the speed and efficiency of ERP deployments. ARR is growing strongly, its UK expansion is accelerating, and the company has deepened its product moat through heavy investment in R&D and AI-driven enhancements.

Shaw and Partners thinks that investors should be buying the dip. This morning, the broker upgraded this Australian stock to a buy rating with a $37.30 price target. This implies potential upside of almost 30% from current levels.

The post 3 of the best Australian stocks to buy after the market selloff appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL, Nextdc, and Technology One. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Macquarie Group, and Technology One. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended CSL and Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Light & Wonder Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Lynas Rare Earths Ltd. The Motley Fool Australia has recommended Gqg Partners, Light & Wonder Inc, and Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There are a lot of ASX shares to choose from on the Australian market.

To narrow things down, let’s take a look at three that Ord Minnett is bullish on right now.

Here’s what it is recommending:

Brazilian Rare Earths Ltd (ASX: BRE)

If you are looking for rare earths exposure, Ord Minnett thinks that Brazilian Rare Earths could be the way to do it. Though, only if you have a high tolerance for risk. The broker has put a speculative buy rating and $6.30 price target on its shares.

It believes the company is well-placed to monetise its rare earth discoveries and bauxite resources. It said:

Its shares have climbed 145% since 20 August but we expect there is much more to come as it progresses plans to monetise its rare earth discoveries and bauxite resources. Carester are the French REO experts also assisting Iluka Resources (ILU) with technical advice for its Eneabba refinery. Carester is also building the France–Japan Caremag refinery in France using feedstock of recycled magnets and rare earth oxide (REO) concentrates, which is due to start in late 2026. ‍ Brazil Rare Earths’ provincial-scale tenements in Brazil include multiple rare earth deposits and 568 million tonnes(Mt) of bauxite, including 98Mt of direct shipping ore (DSO).

Siteminder Ltd (ASX: SDR)

Another ASX share that has caught the eye of Ord Minnett is travel technology company Siteminder. It has put a buy rating and $7.97 price target on its shares.

The broker feels that the market is seriously undervaluing its shares at current levels. It explains:

The SiteMinder investor day led Ord Minnett to reiterate its view that the current share price reflects a ‘ground zero’ view of the future. In other words, the market is attributing little or no value to the potential upside from the Channels Plus (C+) and Dynamic Revenue Plus (DRP) products. We consider this approach unwise given the weight of industry feedback we have received over the last 18 months.

Universal Store Holdings Ltd (ASX: UNI)

A third ASX share that has been given the thumbs up by its analysts is Universal Store. Ord Minnett has an accumulate rating and $9.60 price target on its shares.

It feels its shares are good value given its positive growth outlook. The broker said:

Ord Minnett cut its EPS forecasts for FY26–28 by 4–6% to reflect management’s guidance that sales comparisons will become more challenging in the remainder of FY26, and that Universal will continue to reinvest in the business, prioritising long-term growth over short-term profits. The company’s price-to-earnings ratio is in line with the average listed ASX retailer. ‍With a $17 million net cash position, expected 10% per annum EPS growth over two years, and further market share opportunities as competitors exit, we retain a Accumulate rating on Universal. Our price target falls to $9.60 from $9.80 to reflect the EPS downgrades.

The post Why Ord Minnett is bullish on these ASX shares appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Universal Store. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended SiteMinder. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool Australia has recommended Universal Store. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Back in November of 2021, it seemed Woolworths Group Ltd (ASX: WOW) shares could do no wrong.

The company had emerged relatively unscathed from the worst of the COVID-19 pandemic. Profits were healthy, the dividends were flowing and, just a few months prior, the ‘Fresh Food People’s stock had hit a new record high of over $42 a share.

What a difference four years can make.

Today, Woolworths investors are at the tail end of the worst two years the company has faced since the Masters hardware debacle ended a decade ago.

As it currently stands, Woolworths shares are languishing at just $27.85 each (at the time of writing) after hitting a new 52-week (and seven-year) low of $25.51 last month.

Nothing seems to have gone right for this veteran supermarket operator of late. Last year’s CEO transition was less than seamless for one. For another, the company has continued to be outshone by its arch-rival Coles Group Ltd (ASX: COL). The market found the latest set of full-year results, released back in late August, particularly disturbing. The company’s shares were down almost 15% on the day they came out.

Long-term Woolworths investors’ pain has been exacerbated by the valuation premium Woolworths shares used to enjoy. This gave the company a higher ledge to fall off when sentiment turned. It used to be common for Woolworths shares to trade on a price-to-earnings (P/E) ratio of over 35. Today, its unadjusted earnings multiple is under 24.

How much have Woolworths shares lost over the past four years?

But time to put some numbers to Woolworths’ pain. If you picked up Woolworths shares exactly four years ago, you would have been able to buy them for $40.22 (the closing share price on 19 November 2021).

If an investor had bought $5,000 worth of Woolworths shares back then, that parcel would be worth just $3,462.20 today. That’s not factoring in brokerage or other costs.

That’s a loss worth 30.76%. Ouch.

Of course, Woolworth shares have also paid out dividends over those past four years though, which do mitigate these losses somewhat. Those dividends amounted to a collective $4.24 per share, meaning our $5,000 would have attracted approximately $527.10 in dividends. Thus, we are left with a final figure of $3,989.30 from our original $5,000. A loss of 20.21%.

So I can conclude by saying that ‘thank goodness I didn’t buy Woolworths shares four years ago’. Hopefully, the next four years will be kinder to this ASX 200 veteran.

The post Thank goodness I didn’t invest $5,000 in Woolworths shares 4 years ago appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Woolworths Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

TechnologyOne Ltd (ASX: TNE) shares have been under significant pressure this week.

The enterprise software provider’s shares sank 17% on Tuesday despite releasing a record result for FY 2025.

Has this created a buying opportunity? Let’s see what analysts are saying about the tech stock.

Should you buy TechnologyOne shares?

According to a note out of Bell Potter, its analysts have retained their hold rating on the company’s shares with a reduced price target of $33.00.

Commenting on the result, the broker said:

FY25 PBT of $181.5m was close to in line with our forecast of $182.4m and VA consensus of $181.8m. The result was still ahead of guidance, however, which was PBT growth of 13-17% and the result was 19% growth.

Bell Potter advised that it has trimmed its valuation to reflect a re-rating in the tech sector this month. It adds:

We have reduced the multiples we apply in the PE ratio and EV/EBITDA valuations from 80x and 42.5x to 65x and 35x due to the recent de-rating in the tech sector and the multiples being applied. We have also increased the WACC we apply in the DCF from 7.9% to 8.1% for the same reason.

The net result is a 13% decrease in our PT to $33.50 which is <15% premium to the share price so we maintain our HOLD recommendation. We note the outlook is little changed and we still forecast strong double digit growth over the medium term but the current FY26 PE ratio of c.60x is still demanding in our view and equates to a PEG ratio of around 3x.

Over at Macquarie Group Ltd (ASX: MQG), its analysts are also sitting on the fence with TechnologyOne shares. This morning, they have retained their neutral rating with a $28.20 price target.

Macquarie is concerned that it may get worse before it gets better for the company. The broker commented:

Long-term story remains attractive, but it may get worse before it gets better. Valuation rebased post-result, but slowing growth, higher costs, and a lack of clear positive catalysts in the near-term while still trading at ~62x NTM PER suggests there may be further downside risk. Retain Neutral.

Broker upgrade

Finally, the team at Morgans doesn’t agree. Its analysts have upgraded TechnologyOne’s shares to an accumulate rating with a $34.50 price target. They said:

TNE’s FY25 result was largely in line with our expectations with the group delivering, PBT growth of +19% to $181.5m ahead of its 13-17% guidance range, and in line with consensus. The negative share price reaction appears to have been driven by softer than expected ARR/NRR print, which saw a 2% miss to ARR growth expectations vs consensus, despite this, the group continues to deliver, with ARR of $554.6m (+18% YoY), which along with its NRR growth of 115% continues to see TNE Ontrack to achieve its long-term ARR growth aspirations. We modestly pare our EPS forecasts by 1-3% in FY26-28F. and move to an ACCUMULATE rating, with our target price $34.50 now reflecting a TSR of +19% following TNE’s post result share price movement.

The post Should you buy TechnologyOne shares after they crashed 17%? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Technology One. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and Technology One. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Fortescue Ltd (ASX: FMG) shares have been one of the best investments over the past several years. However, with the iron ore price not exactly booming, it’s important to know where the dividend is projected to go in the next few years.

The miner’s key commodity is iron ore; it’s less diversified than BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) because those two are also involved in copper and other commodities.

Fortescue’s FY25 dividend suffered a significant decline, so let’s take a look at what experts think of the dividend outlook.

FY26

The company recently reported its FY26 first-quarter update, and broker UBS analysed the numbers. It said that the three months to September 2025 were “solid” with a “strong” sold price for its commodities.

UBS said Fortescue’s hematite (iron ore) shipments of 47.6 million tonnes (mt) were in line with expectations, as were production costs. However, the higher-grade Iron Bridge shipments were 11% lower than expected as the ramp-up of that project continues, though the realised price was 9% stronger than expected.

The business is expecting FY26 shipments to be between 195mt to 205mt, while C1 costs are expected to between US$17.50 to US$18.50 per tonne.

UBS said that while iron ore fundamentals have been “tighter than expected” on a range of factors, it’s still expecting conditions to weaken as Simandou ramps up over the next three years.

The broker believes iron ore low-grade discounts (to the regular grade) are expected to stay narrow, which is promising for the price Fortescue can sell for its production.

Either way, UBS suggests that China’s economic outlook will be “pivotal” and US trade policy could be “key” for the foreseeable future.

After taking that into account, UBS predicts Fortescue could pay an annual dividend per share of $1.29 in FY26. At the time of writing, this translates into a potential grossed-up dividend yield of 9.1%, including franking credits.

FY27

UBS is currently forecasting that the Fortescue earnings and dividend per share could fall back in the 2027 financial year, which could be its worst output for many years, if the projections come true.

The broker has predicted that owners of Fortescue shares could receive an annual dividend per share of 72 cents.

FY28

It could get slightly better for the business in FY28, though still substantially below what it’s projected to pay in the 2026 financial year.

UBS projects that Fortescue could pay shareholders an annual dividend per share of 78 cents.

FY29

Fortescue could see another improvement in the 2029 financial year based on UBS’ projections for the ASX mining share.

The iron ore miner is projected to pay an annual dividend per share of 85 cents in FY29.

FY30

The 2030 financial year is a long way away, a lot could happen with iron ore prices between now and then.

If UBS’ projections come true, then the miner could pay owners of Fortescue shares an annual dividend per share of 89 cents.

The post Here’s the dividend forecast out to 2030 for Fortescue shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BHP Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) is trading in the red again on Wednesday afternoon. At the time of writing, the index is down another 0.17% for the day, marking a 7% sell-off from its peak in late October.

The index appears determined to continue its downward trend amid weak earnings expectations, ongoing geopolitical tensions, and growing concerns about uncertainty surrounding rate cuts. However, analysts think this might be a short-term market pullback rather than a significant correction.

But there are some shares that aren’t expected to perform particularly well over the next 12 months.

In a recent note to investors, analysts at Macquarie Group Ltd (ASX: MQG) have raised concerns about one ASX 200 stock it thinks will plunge in the next 12 months.

Helia shares tipped to drop

At the time of writing, Helia Group Ltd (ASX: HLI) shares are trading 0.51% lower for the day at $5.85 a piece. Over the past month, its share price has increased by 6.36%, and over the year, it’s 32.05% higher.

But Macquarie thinks the shares are about to start diving.

In the note, the broker confirmed its underperform rating on Helia shares and reduced its target price to $3.95 per share. At the time of writing, this implies a huge 32.5% downside for investors over the next 12 months.

“Valuation: We reduce the valuation to $3.95/share (from $4.10/share), driven by our dividend discount model as we slow down capital returns,” the broker said in its note.

“While conditions are supportive near-term, at current valuations (~1.6x P/NTA), investors are both overpaying for the potential of capital returns, and have priced in favourable conditions indefinitely. Maintain Underperform.”

“Earnings changes: We raise EPS by +5%/+2%/+3% in FY25-27E, as we lower claims to reflect the 3Q25 trading update and mark-to-market of the yield curves, but there are minor downgrades in outer years as we bring forward reserve releases,” Macquarie said.

What else did the broker have to say about the ASX 200 stock?

Macquarie said that Helia continues to deliver large negative claims, which have been driven by reserve releases. It explained that while macro conditions support this, the company’s claims reserves have decreased significantly, and has brought forward earnings. 

“We forecast the liability for incurred claims (LIC) at FY25 to close at ~$200m (vs ~$270m in FY24). Further negative claims in the near-term is possible, but as the claims reserve decreases, the scope for large reserve releases to continue indefinitely is unlikely. Even with favourable assumptions, reserving on new delinquencies will begin offsetting the reduction in claims reserves on the “back book”. This underpins our view of normalising claims,” the broker said.

The broker added that cutting costs is not enough to offset long-term revenue headwinds.

“Our earlier analysis suggested that even with aggressive capital returns and under a run-off scenario, we arrive at a valuation of $5/share (pre-dividends). With HLI announcing its intention to continue writing LMI and hence require capital, we pare back the speed of capital returns, and downgrade our DDM valuation despite earnings upgrades.”

The post Guess which ASX 200 stock is tipped to plummet 32%? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Zip Co Ltd (ASX: ZIP) shares have had a rollercoaster of a ride over the past 18 months.

At the time of writing on early Wednesday afternoon, they’re trading 0.68% lower for the day at $2.92 each. The share price has now fallen nearly 40% from a 4-year peak in early October. The sell-off means the stock is now 36.7% lower over the past month, and down 10.67% over the year. 

But the good news is that the shares are still a whopping 170.4% higher than their 52-week low of $1.08 per share.

So if I bought $10,000 of shares in January, how much are they worth now?

Zip shares are currently trading 1.52% below their value on 2 January. This means $10,000 invested at the beginning of the year would now be worth a total of $9,848.

What caused Zip’s share price nosedive?

Zip shares started declining after the company released its Q1 FY26 results on 20 October. At the time, it looked like investors could have sold up and taken profits following the stock’s peak.

They tumbled further following the company’s annual general meeting (AGM) earlier this month. This was despite Group CEO and Managing Director Cynthia Scott telling investors that the company is on track to achieve its upgraded FY26 guidance. Management also ruled out any possibility of dividends in the near future, stating that the business plans to retain future earnings to finance company growth instead. 

Is there any upside ahead for Zip shares?

The past year’s performance might not have earned investors the big bucks, but there is still some opportunity for more momentum ahead.

The Australian financial technology company has grown its operations in Australia, New Zealand, and the United States to provide customer services in 12 countries. Zip now offers point-of-sale credit and digital payment services to consumers and merchants via interest-free buy-now, pay-later (BNPL) technology. The company has two consumer products: Zip Money and Zip Pay.

In late October, the company announced that its US segment is expanding its partnership with Stripe, a programmable financial services business. 

Zip is scaling its US business too, and is considering a dual listing on Nasdaq, which could help it tap into US capital markets and boost its valuation among US-based investors.

What do brokers think of the stock?

Macquarie analysts initiated coverage of the Australian financial technology company in late October, saying it expects Zip to deliver rapid growth going forward. It has an outperform rating and $4.85 target price on Zip shares. 

TradingView data shows some analysts are even more bullish on the stock. Out of 11 analysts, 9 have a buy or strong buy rating and 2 hold a neutral stance. The maximum upside is as high as $6.20, representing a potential 111.97% upside over the next 12 months, at the time of writing. 

The post $10,000 invested in Zip shares in January is now worth… appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) pioneered long-range electric vehicles (EVs) and for many years benefited from rising demand for its high-end, desirable products. Tesla’s initial strategy focused on a top-down approach, where it developed high-performance, long-range luxury EVs to build the brand’s image and generate capital for the development of more affordable mass-market models. This strategy was very successful and created a strong halo effect around the brand. 

Tesla effectively dominated the U.S. luxury EV market for years, and at one point was even outselling traditional luxury brands like BMW and Mercedes-Benz. If you want to learn more about how Tesla makes money, its financials, and key recent developments with the business, keep reading. 

What does Tesla do?

Tesla designs, manufactures, and sells EVs, along with energy generation and storage systems. It produces a range of electric cars, including the Model S, Model 3, Model X, Model Y, and Cybertruck. It also manufactures the Tesla Semi commercial truck. The company makes clean energy products such as solar panels and solar roof tiles for homes and businesses.

It sells and installs battery energy-storage systems, from home-based units to grid-scale storage systems. Tesla builds and maintains a global network of Superchargers for its electric vehicles and offers home-charging products as well. The company also develops and sells its supervised Full Self-Driving (FSD) technology, an advanced driver-assistance system that still requires active driver readiness.

More recently, management has dealt with a range of challenges, including heightened competition, production shipping delays, declining sales in certain markets, and a drop in profits despite record vehicle deliveries. Tesla is also facing multiple recalls and investigations.

And some investors remain unhappy with the fact that CEO Elon Musk has shifted some of the company’s focus and capital toward artificial intelligence and robotics projects, and recent controversies surrounding Musk’s public comments and political activities have led to protests and calls for Tesla boycotts. Still, its brand recognition and charging infrastructure remain key assets.

How does Tesla make money?

Tesla makes money through the sale of its electric vehicles, which remain its largest revenue source. The company also generates revenue from leasing its vehicles and from servicing and repairing them. Its energy and storage segment develops, manufactures, and sells clean energy products for residential, commercial, and utility-scale use. The segment’s products include the residential Powerwall and large-scale Megapack battery systems.

Tesla has historically earned significant revenue from selling regulatory credits, but as more major automakers develop and sell their own EVs, they may become less reliant on buying credits from Tesla. Changes in government policies could also significantly impact Tesla’s credit revenue in the near future.

The sale of FSD software upgrades for its self-driving technology is a growing source of revenue. In the past, management has also profited from selling Bitcoin, though this is not a consistent revenue stream. While not yet a major revenue source, the company is positioning itself for earnings from a future robotaxi network and other AI-related opportunities it hopes to leverage.

Tesla’s financials

In the third quarter of 2025, the company reported revenue of $28.1 billion, up about 12% year over year. Total automotive revenue rose 6% from one year ago, while energy generation and storage sales skyrocketed by 44%. Free cash flow reached a record high of nearly $4 billion, and the company had nearly $42 billion in cash and investments on its balance sheet, which far exceeded its total debt of about $7.5 billion.

It delivered 497,000 vehicles in the three-month period, which surpassed its own forecasts and analyst estimates and was up 7% from one year ago. Tesla reported particularly strong growth in European deliveries (up 25% year over year) and record deliveries in South Korea, Taiwan, Japan, and Singapore.

However, net income came in at $1.4 billion, a sharp decline of 37% from the previous year and the fourth consecutive quarter of a profit drop. Margins have been squeezed as Tesla has lowered prices to stimulate demand and compete with lower-cost EV makers, while it’s also incurring higher operating expenses for AI and robotics projects. The expiration of the U.S. federal EV tax credit in September is expected to weigh on near-term deliveries and sales in the fourth quarter of 2025 and into 2026.

Recent developments

Tesla is heavily investing in the development of robotaxis and humanoid robots. Its long-term financial success could significantly hinge on the adoption of these technologies, which are still in early stages of development and not yet contributing significant revenue. The company plans to unveil a new version of its general-purpose AI-driven Optimus robot in the first quarter of 2026, with an ambitious goal of building a production line by the end of 2026 capable of producing up to a million units annually.

The robotaxi service, which uses a fleet of FSD-enabled Model 3s and Model Ys (some with a human safety monitor, some without), was launched in Austin, Texas, in June 2025. Musk plans a significant expansion of this fleet by the end of 2025, and is aiming for over 1,500 robotaxis in cities including Austin and the San Francisco Bay Area, with potential launches in Arizona, Nevada, and Florida pending regulatory approval.

The two-seater Cybercab, a vehicle specifically designed for autonomy without a steering wheel or pedals, was unveiled in October 2024 and its mass production is a key part of management’s long-term strategy. It plans to start production of the Cybercab in the second quarter of 2026, but the vehicle’s ultimate release timeline may be affected by factors like self-driving software and regulatory approval.

Tesla has introduced the six-seat Model Y L in China. It features a 2-2-2 seating configuration with second-row captain’s chairs and an overall length and wheelbase longer than the standard Model Y. Deliveries in China began in September 2025, and the variant has been met with strong demand. Production for a U.S. version might start in late 2026, but this has not been confirmed, and the model might never come to North America.

Tesla is also reportedly ramping up work on the second-generation Roadster. Production is still several years away, but the vehicle’s development is progressing, including work on advanced features like the proposed SpaceX package with cold-gas thrusters. The design has been a subject of frequent delays since its initial 2017 unveiling. The most recent estimated time frame for production is around 2027 or later.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How does Tesla make money? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Tesla. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool Australia has recommended Bayerische Motoren Werke Aktiengesellschaft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.