For years, one aspect of Tesla Inc.’s business has been growing outside the public eye, its revenue soaring even as the company’s electric car sales sputtered and stalled.
Now analysts wonder if Tesla’s quiet moneymaker faces problems of its own.
Batteries have given Tesla a badly needed boost. The company’s popular Megapacks — giant batteries that can keep factories, data centers or the electric grid itself humming — are being installed worldwide. Much smaller Powerwall units, meanwhile, supply individual homes. As Tesla spends heavily to ramp up autonomous taxis, and its Optimus robots seem forever a year away, batteries have become an important source of cash.
Tesla doesn’t report battery revenue on its own, instead lumping it in with its solar business. But together, the company’s revenue from batteries and solar gear rose to $12.8 billion last year from $2.8 billion in 2021 — a 358% increase. Tesla’s annual deployments of energy storage doubled in 2024 and grew another 49% in 2025, reaching 46.7 gigawatt-hours last year.
In contrast, revenue from Tesla’s core electric car business peaked at $82.4 billion in 2023 and fell to $69.5 billion last year amid growing competition, policy headwinds and a consumer backlash to Chief Executive Officer Elon Musk’s politics. The Texas-based company does, however, remain the top seller of EVs in the U.S., and its stock hit a record high of $489.88 per share in December on hopes for its future lines of business.
“The growth of the energy business is offsetting a lot of that weakness on the auto side,” said analyst Garrett Nelson with the CFRA research firm. “We are optimistic regarding the future growth of that business and helping sustain the company overall, sustain the earnings as they move through this transition phase,” Nelson said.
That optimism, however, is now being tested.
When Tesla reported its latest delivery numbers this month, first-quarter battery deployments took an unexpected plunge. They fell 15% from the same period last year, whereas many analysts were predicting an increase. Nor was there an obvious reason for the drop.
Reliant on big projects, the battery business can be lumpy. And the entire industry faces headwinds from Washington, DC. President Donald Trump hasn’t revoked tax credits for batteries as he has for new solar plants and wind farms. But most solar and wind projects include batteries to store their surplus power during periods of high production. A slowdown in renewable projects could crimp the battery business as well.
Analysts will be looking for an explanation of the poor quarter when Tesla holds its latest earnings call Wednesday. They’re hoping the drop in deployments was a one-time glitch and not a sign of troubles to come.
“While surprising, I am not ready to call it a trend yet,” said Seth Goldstein, an analyst with the Morningstar market research firm. Unusually harsh winter weather, for example, could have led to unexpected delays on large energy storage projects using Megapacks. “When Tesla can recognize revenue and deployments from that can really make a quarter quite noisy,” Goldstein said.
Tesla did not respond to a request for comment.
Analysts are also looking to future products to restore long-term growth. Megapack 3, capable of delivering about a quarter more electricity than its predecessor, is expected to launch later this year from a new, $200 million Houston-area facility. A planned “Megablock,” unveiled at a September Tesla energy event, will combine four Megapacks.
Large-scale energy storage barely existed as an industry when Tesla started building cars in 2012. Now, however, batteries are being deployed at breakneck speed, backing up solar plants and wind farms, cutting peak power demand from electrified factories and helping prevent blackouts on the grid. Tesla was an early mover, opening one of the world’s first big, grid-tied battery projects in Australia in 2017. Now, the company has installed more than 2,100 commercial and utility-scale projects across the globe, from Chile and Japan to Scotland.
It has also seized a commanding lead in North America, with nearly a 40% market share, according to Wood Mackenzie Ltd. The next largest competitor, Sungrow Power Supply Co., holds a 10% market share.
Batteries don’t generate their own electricity — they merely store it and deliver it when needed. But they can be installed in a fraction of the time it takes to build a power plant, and at a fraction of the cost. BloombergNEF forecasts that global energy storage capacity will balloon in the next decade, reaching 8 times its current level in 2035.
“The economics are favorable to build a battery versus something like a power plant,” said Morningstar’s Goldstein. “Utilities are looking to maintain grid reliability, they’re looking at what’s the best return on investment that’s going to be allowed by regulators, and batteries are increasingly becoming a low-cost option to help with that.”
Project developers favor Tesla’s Megapacks because they combine the battery, inverter, control software and energy-management tools into a package that is relatively easy to deploy and operate, said Allison Weis, global head of energy storage at Wood Mackenzie. That integration helps Tesla compete with often-cheaper Chinese competitors.
In the U.S., such competitors also face tariffs on their China-built batteries, a levy now set at 43.6% according to BNEF. But for Tesla, the tariffs cut both ways. While the company produces some of its own battery cells at its Nevada Gigafactory, many of its cells come from China and are assembled into batteries in the U.S.
Tesla, however, just stood up its own cell factory in Nevada, which the company in January said had an installed annual capacity of 7 gigawatt-hours and is expected to begin operations this year. Tesla also has a $4.3 billion supply agreement with LG Energy Solution Ltd. for cells from a plant in Lansing, Michigan, with production scheduled to start in 2027, according to the US Department of the Interior.
While the slowdown in renewables could pose a problem for the industry within the US, data center developers are rapidly turning to batteries to help power their new projects. As of April, BNEF has tracked 51.5 gigawatt-hours of on-site energy storage at data centers for projects that are either announced, under construction or already operational.
They include data centers used by Musk’s own artificial intelligence firm, xAI. Tesla sold $430 million worth of Megapacks to xAI last year, in another example of Musk’s companies buying each others’ products. The relationship could also give Tesla greater insight into future power center energy demands than its competitors will have.
Ma and Carlson write for Bloomberg.
