Notes to Consolidated Financial Statements
(unaudited)
Note 1 – Summary of Significant Accounting Policies
Unaudited Interim Financial Statements
The consolidated financial statements of Tesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”), including the consolidated balance sheet as of March 31, 2026, the consolidated statements of operations, the consolidated statements of comprehensive income, the consolidated statements of redeemable noncontrolling interests and equity, and the consolidated statements of cash flows for the three months ended March 31, 2026 and 2025, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2025.
The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods.
Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes.
Revenue Recognition
Revenue by source
The following table disaggregates our revenue by major source (in millions):
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | |
| | 2026 | | 2025 | | | | |
| Automotive sales | $ | 15,473 | | | $ | 12,925 | | | | | |
| Automotive regulatory credits | 380 | | | 595 | | | | | |
| Energy generation and storage sales | 2,305 | | | 2,621 | | | | | |
| Services and other | 3,745 | | | 2,638 | | | | | |
| Total revenues from sales and services | 21,903 | | | 18,779 | | | | | |
| Automotive leasing | 381 | | | 447 | | | | | |
| Energy generation and storage leasing | 103 | | | 109 | | | | | |
| Total revenues | $ | 22,387 | | | $ | 19,335 | | | | | |
Automotive Segment
Automotive Sales
Deferred revenue related to internet connectivity, access to our Full Self-Driving (“FSD”) (Supervised) features and their ongoing maintenance, free Supercharging programs and over-the-air software updates primarily on automotive sales amounted to $4.00 billion and $3.87 billion as of March 31, 2026 and December 31, 2025, respectively.
Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of the balance sheet date. Revenue recognized from the deferred revenue balances as of December 31, 2025 and 2024 was $218 million and $258 million for the three months ended March 31, 2026 and 2025, respectively. Of the total deferred revenue balance as of March 31, 2026, we expect to recognize $941 million of revenue in the next 12 months. The remaining balance will be recognized at the time of transfer of control of the product or over the performance period.
We have financing receivables on our consolidated balance sheets related to loans we provide for financing our automotive deliveries. As of March 31, 2026 and December 31, 2025, we had current net financing receivables of $243 million and $247 million, respectively, in Accounts receivable, net, and $506 million and $554 million, respectively, in Other non-current assets for the long-term portion.
We offer resale value guarantees to our commercial banking partners in connection with certain vehicle leasing programs. Under these programs, we originate the lease with our end customer and immediately transfer the lease and the underlying vehicle to our commercial banking partner, with the transaction being accounted for as a sale under ASC 606, Revenue from Contracts with Customers.
We receive upfront payment for the vehicle, do not bear casualty and credit risks during the lease term, and we provide a guarantee capped to a limit if they are unable to sell the vehicle at or above the vehicle’s contractual or determined residual value at the end of the lease term. We estimate a guarantee liability in accordance with ASC 460, Guarantees and record it within other liabilities on our consolidated balance sheets. On a quarterly basis, we assess the estimated market value of vehicles sold under these programs to determine whether there have been changes to the amount of expected resale value guarantee liabilities. As we accumulate more data related to the resale values of our vehicles or as market conditions change, there may be material changes to their estimated values. The total recorded guarantee liabilities on vehicles sold under these programs were immaterial as of March 31, 2026 and December 31, 2025. Our maximum exposure on the guarantees we provide if they are unable to sell the vehicle at or above the vehicle’s contractual residual value at the end of the lease term was $3.67 billion and $3.45 billion as of March 31, 2026 and December 31, 2025, respectively.
Automotive Regulatory Credits
As of March 31, 2026, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was $303 million. Of this amount, we expect to recognize $198 million in the next 12 months and the rest over the remaining performance obligation period. Changes in regulations on automotive regulatory credits may significantly impact our remaining performance obligations and revenue to be recognized under these contracts. Recent governmental and regulatory actions have restricted certain regulatory credit programs tied to our products.
Automotive Leasing Revenue
Direct Sales-Type Leasing Program
Lease receivables relating to sales-type leases are presented on the consolidated balance sheets as follows (in millions):
| | | | | | | | | | | |
| | March 31, 2026 | | December 31, 2025 |
| Gross lease receivables | $ | 205 | | | $ | 259 | |
| Unearned interest income | (10) | | | (14) | |
| Allowance for expected credit losses | (4) | | | (5) | |
| Net investment in sales-type leases | $ | 191 | | | $ | 240 | |
| | | |
| Reported as: | | | |
| Prepaid expenses and other current assets | $ | 116 | | | $ | 130 | |
| Other non-current assets | 75 | | | 110 | |
| Net investment in sales-type leases | $ | 191 | | | $ | 240 | |
Energy Generation and Storage Segment
Energy Generation and Storage Sales
We record as deferred revenue any non-refundable amounts that are primarily related to prepayments from customers, which is recognized as revenue as or when the performance obligations are satisfied. As of March 31, 2026 and December 31, 2025, deferred revenue related to such customer payments amounted to $2.17 billion and $2.04 billion, respectively, mainly due to contractual payment terms. Revenue recognized from the deferred revenue balances as of December 31, 2025 and 2024 was $781 million and $623 million for the three months ended March 31, 2026 and 2025, respectively. We have elected the practical expedient to omit disclosure of the amount of the transaction price allocated to remaining performance obligations for contracts with an original expected contract length of one year or less and the amount that we have the right to invoice when that amount corresponds directly with the value of the performance to date. As of March 31, 2026, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was $10.15 billion. Of this amount, we expect to recognize $5.02 billion in the next 12 months and the rest over the remaining performance obligation period. Changes in government and economic incentives or tariffs may impact the transaction price or our ability to execute these existing contracts.
We have financing receivables on our consolidated balance sheets related to loans we provide for financing our energy products. As of March 31, 2026 and December 31, 2025, we had current net financing receivables of $39 million and $38 million, respectively, in Accounts receivable, net, and $722 million and $731 million, respectively, in Other non-current assets for the long-term portion.
Income Taxes
We are subject to income taxes in the U.S. and in many foreign jurisdictions. Significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized. We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period. In completing our assessment of realizability of our deferred tax assets, we consider our history of income (loss) measured at pre-tax income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits related to stock-based compensation in recent prior years and impacts of the timing of reversal of existing temporary differences. We also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude of future taxable income. Our valuation allowance assessment is based on our best estimate of future results considering all available information.
Our provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
Net Income per Share of Common Stock Attributable to Common Stockholders
Restricted stock awards will be excluded from the computation of diluted weighted average shares until the shares have been deemed to be earned. The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income per share of common stock attributable to common stockholders (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Weighted average shares used in computing net income per share of common stock, basic | 3,234 | | 3,218 | | | | |
| | | | | | | |
| Add: Stock-based awards | 304 | | 303 | | | | |
| | | | | | | |
| | | | | | | |
| Weighted average shares used in computing net income per share of common stock, diluted | 3,538 | | 3,521 | | | | |
The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income per share of common stock attributable to common stockholders, because their effect was anti-dilutive (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Stock-based awards | 7 | | 13 | | | | |
Restricted Cash
Our total cash and cash equivalents and restricted cash, as presented in the consolidated statements of cash flows, was as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31,
2026 | | December 31,
2025 | | March 31,
2025 | | December 31,
2024 |
| Cash and cash equivalents | $ | 16,603 | | | $ | 16,513 | | | $ | 16,352 | | | $ | 16,139 | |
| Restricted cash included in prepaid expenses and other current assets | 327 | | | 389 | | | 415 | | | 494 | |
| Restricted cash included in other non-current assets | 725 | | | 714 | | | 483 | | | 404 | |
| Total as presented in the consolidated statements of cash flows | $ | 17,655 | | | $ | 17,616 | | | $ | 17,250 | | | $ | 17,037 | |
SpaceX Equity Investment
We are presumed to have significant influence over our equity method investment in SpaceX under ASC 323, Equity Method Investments and Joint Ventures, as our CEO also serves as the CEO of SpaceX but as we do not have control over the investee, we have elected the fair value option in accordance with ASC 825, Financial Instruments, to provide a more relevant measure of the investment’s current economic value to financial statement users. The fair value is determined on a quarterly basis in accordance with ASC 820, Fair Value Measurement, based on market observable inputs. The equity investment is presented within Other non-current assets on our consolidated balance sheet. Realized and unrealized gains and losses are recorded to Other expense, net in our consolidated statement of operations. See Note 12, Related Party Transactions, for further information regarding our equity investment.
Accounts Receivable and Allowance for Doubtful Accounts
Depending on the day of the week on which the end of a fiscal quarter falls, our accounts receivable balance may fluctuate as we are waiting for certain customer payments to clear through our banking institutions and receipts of payments from our financing partners, which can take up to approximately two weeks based on the contractual payment terms with such partners. Our accounts receivable balances associated with sales of energy storage products are dependent on billing milestones and payment terms negotiated for each contract, and our accounts receivable balances associated with our sales of regulatory credits are dependent on contractual payment terms. These various factors may have a significant impact on our accounts receivable balance from period to period. As of March 31, 2026 and December 31, 2025, government rebates receivable was $144 million and $108 million, respectively, in Accounts receivable, net.
Financing Receivables
As of March 31, 2026 and December 31, 2025, the vast majority of our financing receivables were at current status with an immaterial balance being past due. As of March 31, 2026 and December 31, 2025, the majority of our financing receivables, excluding MyPower notes receivable, were originated in the past four years.
As of March 31, 2026 and December 31, 2025, the total outstanding balance of MyPower customer notes receivable, net of allowance for expected credit losses, was $238 million and $241 million, respectively, of which immaterial amounts were due in the next 12 months. As of March 31, 2026 and December 31, 2025, the allowance for expected credit losses was $24 million and $26 million, respectively.
Concentration of Risk
Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, short-term investments, restricted cash, accounts receivable and other finance receivables. Our cash and short-term investments balances are primarily on deposit at high credit quality financial institutions or invested in highly rated, investment-grade securities. These deposits are typically in excess of insured limits. As of March 31, 2026 and December 31, 2025, no entity represented 10% or more of our total receivables balance.
Supply Risk
We are dependent on our suppliers, including single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.
Warranties
Accrued warranty activity consisted of the following (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Accrued warranty - beginning of period | $ | 8,607 | | | $ | 6,716 | | | | | |
| Warranty costs incurred | (468) | | | (392) | | | | | |
| Net changes in liability for pre-existing warranties, including expirations and foreign exchange impact | (175) | | | 347 | | | | | |
| Provision for warranty | 508 | | | 543 | | | | | |
| Accrued warranty - end of period | $ | 8,472 | | | $ | 7,214 | | | | | |
Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet adopted
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. We are currently evaluating the provisions of this ASU and expect this ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The ASU simplifies the capitalization guidance by removing all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout ASC 350-40. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date; or following a modified transition approach that is based on the status of the respective projects and whether software costs were capitalized before the date of adoption; or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The ASU establishes authoritative guidance in GAAP about accounting for government grants received by business entities, clarifies the appropriate accounting, in an effort to reduce diversity in practice, and increase consistency of application across business entities. The ASU is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Adoption of this ASU can be applied a modified prospective approach, a modified retrospective approach, or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
Recently adopted accounting pronouncements
ASU 2025-05
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. We adopted this ASU on a prospective basis effective January 1, 2026. While this ASU was adopted, we did not elect practical expedient permitted under this ASU. Therefore, the adoption has no impact on our consolidated financial statements.
Note 2 – Fair Value of Financial Instruments
ASC 820, Fair Value Measurement, states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tiered fair value hierarchy, which prioritizes which inputs should be used in measuring fair value, is comprised of: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than quoted prices in active markets that are observable either directly or indirectly and (Level III) unobservable inputs for which there is little or no market data. The fair value hierarchy requires the use of observable market data when available in determining fair value. Our assets and liabilities that were measured at fair value on a recurring basis were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2026 | | December 31, 2025 |
| | Fair Value | | Level I | | Level II | | Level III | | Fair Value | | Level I | | Level II | | Level III |
| Certificates of deposit and time deposits | $ | 13,397 | | | $ | — | | | $ | 13,397 | | | $ | — | | | $ | 14,600 | | | $ | — | | | $ | 14,600 | | | $ | — | |
| U.S. government securities | 7,936 | | | — | | | 7,936 | | | — | | | 7,321 | | | — | | | 7,321 | | | — | |
| Commercial paper | 6,804 | | | — | | | 6,804 | | | — | | | 5,617 | | | — | | | 5,617 | | | — | |
| Money market funds | 2,133 | | | 2,133 | | | | | — | | | 1,890 | | | 1,890 | | | — | | | — | |
| SpaceX equity investment | 2,002 | | | — | | | 2,002 | | | — | | | — | | | — | | | — | | | — | |
| Digital assets (1) | 786 | | | 786 | | | — | | | — | | | 1,008 | | | 1,008 | | | — | | | — | |
| Corporate debt securities | 3 | | | — | | | 3 | | | — | | | 8 | | | — | | | 8 | | | — | |
| Total | $ | 33,061 | | | $ | 2,919 | | | $ | 30,142 | | | $ | — | | | $ | 30,444 | | | $ | 2,898 | | | $ | 27,546 | | | $ | — | |
(1)As of March 31, 2026 and December 31, 2025, the majority of our digital assets were comprised of 11,509 units of Bitcoin held at an acquisition cost of $386 million.
Our cash, cash equivalents and short-term investments classified by security type as of March 31, 2026 and December 31, 2025 consisted of the following (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2026 |
| | Adjusted Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Short-Term Investments |
| Cash | $ | 14,470 | | | $ | — | | | $ | — | | | $ | 14,470 | | | $ | 14,470 | | | $ | — | |
| Certificates of deposit and time deposits | 13,398 | | | — | | | (1) | | | 13,397 | | | — | | | 13,397 | |
| U.S. government securities | 7,942 | | | 2 | | | (8) | | | 7,936 | | | — | | | 7,936 | |
| Commercial paper | 6,808 | | | — | | | (4) | | | 6,804 | | | — | | | 6,804 | |
| Money market funds | 2,133 | | | — | | | — | | | 2,133 | | | 2,133 | | | — | |
| Corporate debt securities | 3 | | | — | | | — | | | 3 | | | — | | | 3 | |
| Total cash, cash equivalents and short-term investments | $ | 44,754 | | | $ | 2 | | | $ | (13) | | | $ | 44,743 | | | $ | 16,603 | | | $ | 28,140 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2025 |
| | Adjusted Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Short-Term Investments |
| Cash | $ | 14,623 | | | $ | — | | | $ | — | | | $ | 14,623 | | | $ | 14,623 | | | $ | — | |
| Certificates of deposit and time deposits | 14,598 | | | 2 | | | — | | | 14,600 | | | — | | | 14,600 | |
| U.S. government securities | 7,318 | | | 5 | | | (2) | | | 7,321 | | | — | | | 7,321 | |
| Commercial paper | 5,619 | | | — | | | (2) | | | 5,617 | | | — | | | 5,617 | |
| Money market funds | 1,890 | | | — | | | — | | | 1,890 | | | 1,890 | | | — | |
| Corporate debt securities | 8 | | | — | | | — | | | 8 | | | — | | | 8 | |
| Total cash, cash equivalents and short-term investments | $ | 44,056 | | | $ | 7 | | | $ | (4) | | | $ | 44,059 | | | $ | 16,513 | | | $ | 27,546 | |
As of March 31, 2026 and December 31, 2025, short-term investments held and restricted for our insurance business were $282 million and $254 million, respectively.
As of March 31, 2026, the majority of our short-term investments had contractual maturity dates within one year.
Disclosure of Fair Values
Our financial instruments that are not re-measured at fair value include accounts receivable, financing receivables, other receivables, accounts payable, accrued liabilities, customer deposits and debt. The carrying values of these financial instruments materially approximate their fair values.
Note 3 – Inventory
Our inventory consisted of the following (in millions):
| | | | | | | | | | | |
| | March 31,
2026 | | December 31,
2025 |
| Raw materials | $ | 4,310 | | | $ | 4,522 | |
| Work in process | 1,922 | | | 1,725 | |
| Finished goods (1) | 6,842 | | | 4,849 | |
| Service parts | 1,360 | | | 1,296 | |
| Total | $ | 14,434 | | | $ | 12,392 | |
(1)Finished goods inventory includes products-in-transit to fulfill customer orders, new vehicles, used vehicles and energy products available for sale.
We write-down inventory for any excess or obsolete inventory or when we believe that the net realizable value of inventory is less than the carrying value. During the three months ended March 31, 2026 and 2025, we recorded write-downs of $77 million and $79 million, respectively, in Cost of revenues in the consolidated statements of operations.
Note 4 – Property, Plant and Equipment, Net
Our property, plant and equipment, net, consisted of the following (in millions):
| | | | | | | | | | | |
| March 31,
2026 | | December 31,
2025 |
| Machinery, equipment, vehicles and office furniture | $ | 21,788 | | | $ | 20,864 | |
| Land and buildings | 12,558 | | | 11,837 | |
| AI infrastructure | 7,690 | | | 6,816 | |
| Tooling | 4,924 | | | 4,868 | |
| Leasehold improvements | 4,608 | | | 4,439 | |
| Computer equipment, hardware and software | 3,367 | | | 3,206 | |
| Construction in progress | 9,629 | | | 8,786 | |
| Property, plant and equipment | 64,564 | | | 60,816 | |
| Less: Accumulated depreciation | (21,351) | | | (20,173) | |
| Property, plant and equipment, net | $ | 43,213 | | | $ | 40,643 | |
Construction in progress is primarily comprised of ongoing construction and expansion of our facilities, equipment and tooling related to the manufacturing of our products as well as AI-related assets which have not yet been placed in service.
Depreciation expense during the three months ended March 31, 2026 and 2025 was $1.34 billion and $1.15 billion, respectively.
Note 5 – Accrued Liabilities and Other
Our accrued liabilities and other current liabilities consisted of the following (in millions):
| | | | | | | | | | | |
| March 31,
2026 | | December 31,
2025 |
| Accrued purchases (1) | $ | 3,181 | | | $ | 2,577 | |
| Accrued warranty reserve, current portion | 2,444 | | | 2,475 | |
| Payroll and related costs | 1,884 | | | 1,907 | |
| Customer deposits | 1,742 | | | 1,311 | |
| Taxes payable (2) | 1,613 | | | 1,594 | |
| Operating lease liabilities, current portion | 988 | | | 954 | |
| Sales return reserve, current portion | 571 | | | 529 | |
| Other current liabilities | 2,131 | | | 1,932 | |
| Total | $ | 14,554 | | | $ | 13,279 | |
(1)Accrued purchases primarily reflects goods received and services incurred for which we had not yet been invoiced. As we are invoiced for these goods and services, this balance will reduce and accounts payable will increase.
(2)Taxes payable primarily includes income tax, value added tax, sales tax, property tax and use tax payables.
Note 6 – Other Long-Term Liabilities
Our other long-term liabilities consisted of the following (in millions):
| | | | | | | | | | | |
| March 31,
2026 | | December 31,
2025 |
| Accrued warranty reserve | $ | 6,028 | | | $ | 6,132 | |
| Operating lease liabilities | 5,673 | | | 5,389 | |
| Other non-current liabilities | 1,454 | | | 1,339 | |
| Total other long-term liabilities | $ | 13,155 | | | $ | 12,860 | |
Note 7 – Debt
The following is a summary of our debt and finance leases as of March 31, 2026 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Carrying Value | | Unpaid
Principal
Balance | | Unused
Committed
Amount (1) | | Contractual
Interest Rates | | Contractual
Maturity Date |
| | Current | | Long-Term | | | | |
| Recourse debt: | | | | | | | | | | | |
| RCF Credit Agreement | $ | — | | | $ | — | | | $ | — | | | $ | 5,000 | | | Not applicable | | January 2028 |
| Other | — | | | 2 | | | 2 | | | — | | | 5.45-5.75% | | March 2030-January 2031 |
| Total recourse debt | — | | | 2 | | | 2 | | | 5,000 | | | | | |
| Non-recourse debt: | | | | | | | | | | | |
| Automotive Asset-backed Notes | 1,319 | | | 1,417 | | | 2,746 | | | — | | | 2.52-6.57% | | June 2027-June 2035 |
| China Working Capital Facility | — | | | 5,794 | | | 5,794 | | | — | | | 2.01-2.11% | | September 2026-March 2027 (2) |
| Energy Asset-backed Notes | 44 | | | 331 | | | 379 | | | — | | | 5.08-6.25% | | June 2050 |
| | | | | | | | | | | |
| Cash Equity Debt | 11 | | | 101 | | | 118 | | | — | | | 5.25% | | July 2034 |
| Total non-recourse debt | 1,374 | | | 7,643 | | | 9,037 | | | — | | | | | |
| Total debt | 1,374 | | | 7,645 | | | $ | 9,039 | | | $ | 5,000 | | | | | |
| Finance leases | 73 | | | 137 | | | | | | | | | |
| Total debt and finance leases | $ | 1,447 | | | $ | 7,782 | | | | | | | | | |
The following is a summary of our debt and finance leases as of December 31, 2025 (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Carrying Value | | Unpaid
Principal
Balance | | Unused
Committed
Amount (1) | | Contractual
Interest Rates | | Contractual
Maturity Date |
| Current | | Long-Term | | | | |
| Recourse debt: | | | | | | | | | | | |
| RCF Credit Agreement | $ | — | | | $ | — | | | $ | — | | | $ | 5,000 | | | Not applicable | | January 2028 |
| Other | 1 | | | 2 | | | 3 | | | — | | | 4.70-5.75% | | January 2026-January 2031 |
| Total recourse debt | 1 | | | 2 | | | 3 | | | 5,000 | | | | | |
| Non-recourse debt: | | | | | | | | | | | |
| Automotive Asset-backed Notes | 1,492 | | | 1,745 | | | 3,249 | | | — | | | 2.47-6.57% | | October 2026-June 2035 |
| China Working Capital Facility | — | | | 4,288 | | | 4,288 | | | 1,429 | | | 2.01-2.11% | | March 2026-December 2026 (2) |
| Energy Asset-backed Notes | 55 | | | 337 | | | 397 | | | — | | | 5.08-6.25% | | June 2050 |
| Cash Equity Debt | 21 | | | 212 | | | 240 | | | — | | | 5.25-5.81% | | July 2034-January 2035 |
| Total non-recourse debt | 1,568 | | | 6,582 | | | 8,174 | | | 1,429 | | | | | |
| Total debt | 1,569 | | | 6,584 | | | $ | 8,177 | | | $ | 6,429 | | | | | |
| Finance leases | 71 | | | 152 | | | | | | | | | |
| Total debt and finance leases | $ | 1,640 | | | $ | 6,736 | | | | | | | | | |
(1)Refer to the notes to the consolidated financial statements included in our reporting on Form 10-K for the year ended December 31, 2025 for restrictions on draw-down or use for general corporate purposes with respect to any available committed funds under our debt facilities, as applicable.
(2)As we have the intent and ability to refinance the loan on a long-term basis, we classify it as Debt and finance leases, net of current portion in the consolidated balance sheets.
Recourse debt refers to debt that is recourse to our general assets. Non-recourse debt refers to debt that is recourse to only assets of our subsidiaries. The differences between the unpaid principal balances and the net carrying values are due to debt discounts or deferred issuance costs. As of March 31, 2026, we were in material compliance with all financial debt covenants.
Warehouse Agreement
In the first quarter of 2026, we entered into an uncommitted revolving Loan and Security Agreement (the "Warehouse Agreement") with a syndicate of banks. Under the Warehouse Agreement, we may borrow up to $1.50 billion in total principal amount which is secured by certain financing receivables and/or beneficial interests related to certain leased vehicles. Subject to extension in accordance with the terms of the Warehouse Agreement, the ability to draw under the Warehouse Agreement expires in March 2027, and the maturity date for borrowings is the earlier of the end of the underlying lease and loan terms or March 2034. Amounts drawn under the Warehouse Agreement bear interest at a rate equal to SOFR plus 0.65% to 1.00%. As of March 31, 2026, we have no borrowings outstanding under the Warehouse Agreement.
We are subject to certain conditions and limitations, including advance rate limits, a required reserve account, various performance triggers and excess concentration limits.
Note 8 – Equity Incentive Plans
2025 CEO Interim Award
Following the Delaware Supreme Court’s decision reversing the Court of Chancery’s rescission order and reinstating the performance-based stock option award our CEO was granted by the Company on January 21, 2018 (the “2018 CEO Performance Award”), on March 18, 2026 the Court of Chancery entered a final order implementing such reversal. On April 21, 2026 the Board approved the determination that the final order and judgment allowing our CEO to exercise the 2018 CEO Performance Award in full constituted a Tornetta Decision Event (as defined in the restricted stock award granted to our CEO on August 3, 2025 (the “2025 CEO Interim Award”), resulting in the immediate forfeiture of the 2025 CEO Interim Award by our CEO. These actions are consistent with the “no double dip” principle, which precludes Mr. Musk from getting a windfall in the event that he may exercise the 2018 CEO Performance Award. As of March 31, 2026, no stock-based compensation expense was recognized related to the 2025 CEO Interim Award.
2026 Implementation Agreement
As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, a special committee of the Board consisting of disinterested directors Robyn Denholm and Kathleen Wilson-Thompson (the “Special Committee”), consistent with its purpose, reconvened to consider, evaluate and determine all aspects of the retention and incentivization of our chief executive officer, Mr. Elon Musk, and any methods, approaches or manners for doing so, including with respect to the 2025 CEO Interim Award and the 2018 CEO Performance Award.
As a result of the foregoing events, the Special Committee considered the impact of the potential exercise of the 2018 CEO Performance Award on the Company. The Special Committee considered a number of factors, including the negative impact on the Company resulting from the likely sale of a significant number of shares of the Company’s stock to cover the exercise price and tax obligations. On April 17, 2026, the Special Committee recommended and on April 21, 2026 (the “effective date”), the Board (with Mr. Elon Musk and Mr. Kimbal Musk recused) approved the Company’s entry into the Implementation Agreement, implementing a process for Mr. Musk’s exercise of the 2018 CEO Performance Award that the Board determined is in the best interests of the Company and intended to mitigate any negative impact of significant share sales on the Company.
The Implementation Agreement provides Mr. Musk with no additional economic benefit and incorporates features similar to those in the performance-based restricted stock granted to our CEO in 2025 (the “2025 CEO Performance Award”) and the 2025 CEO Interim Award that were each designed and approved by the Special Committee to retain and incentivize Mr. Musk. Consequently, the Implementation Agreement (i) focuses on retaining Mr. Musk’s continued service at a critical time for the Company and restricts the timing of Mr. Musk’s access to the economics associated with the 2018 CEO Performance Award by imposing a service-based vesting condition on restricted shares of common stock (the “Restricted Shares”) to be issued to Mr. Musk upon exercise of the 2018 CEO Performance Award, requiring him to remain in continuous service as CEO or as an executive officer responsible for product development or operations (as approved by the Board’s disinterested directors) through January 19, 2028, and by commencing the five-year holding period on such vesting date (rather than the exercise date), (ii) provides that Mr. Musk may satisfy the exercise price of the 2018 CEO Performance Award by electing net settlement by the Company or paying cash, and (iii) provides for cooperation between the Company and Mr. Musk to create a mutually-agreeable plan to address satisfaction of applicable tax obligations between the Company and Mr. Musk, thus providing a path to mitigate potential negative impacts on the Company.
We assessed whether there is any incremental fair value that needs to be recognized as a result of the Implementation Agreement. As of the effective date, we determined that the fair value of the original stock option awards immediately before the effective date was greater than the fair value of the Restricted Shares after the effective date. The stock options underlying the 2018 CEO Performance Award were fully vested and their grant-date fair value has already been fully recognized. As such, no incremental stock-based compensation expense will be recorded during the service period of the award.
2025 CEO Performance Award
On September 3, 2025 (the “2025 CEO Performance Award Grant Date”), the Board of Directors granted the 2025 CEO Performance Award to our CEO, consisting of approximately 423.7 million shares of performance-based restricted stock to our CEO, which was approved on November 6, 2025 by our shareholders (the “2025 CEO Performance Award Accounting Grant Date”).
Until such time as there are no shares under the 2025 CEO Performance Award that are not earned (the “Unearned Shares”), our CEO’s Unearned Shares will vote proportionately to the votes of all other shares of our capital stock that are present and entitled to vote at any annual or special meeting (or similar action) of our shareholders (including our CEO). Generally, each of the 12 tranches of the 2025 CEO Performance Award will become “Earned Shares” upon our CEO remaining in Eligible Service (as defined below) and the certification by disinterested directors that the following have been achieved: (i) the market capitalization milestone for such tranche and (ii) any one of the twelve operational milestones (clauses (i) and (ii), together the “Performance Milestones”). Our CEO will be able to direct the vote of such Earned Shares.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Tranche # | | Number of Shares Subject to Tranche | | Market Capitalization Milestones (2) | | Operational Milestones | | Achievement Status |
| 1 | | 35,311,992 | | $2.0 trillion | | Achievement of any 1 of the 12 Operational Milestones | | - |
| 2 | | 35,311,992 | | $2.5 trillion | | Achievement of any 2 of the 12 Operational Milestones | | - |
| 3 | | 35,311,992 | | $3.0 trillion | | Achievement of any 3 of the 12 Operational Milestones | | - |
| 4 | | 35,311,992 | | $3.5 trillion | | Achievement of any 4 of the 12 Operational Milestones | | - |
| 5 | | 35,311,992 | | $4.0 trillion | | Achievement of any 5 of the 12 Operational Milestones | | - |
| 6 | | 35,311,992 | | $4.5 trillion | | Achievement of any 6 of the 12 Operational Milestones | | - |
| 7 | | 35,311,992 | | $5.0 trillion | | Achievement of any 7 of the 12 Operational Milestones | | - |
| 8 | | 35,311,992 | | $5.5 trillion | | Achievement of any 8 of the 12 Operational Milestones | | - |
| 9 | | 35,311,992 | | $6.0 trillion | | Achievement of any 9 of the 12 Operational Milestones | | - |
| 10 | | 35,311,992 | | $6.5 trillion | | Achievement of any 10 of the 12 Operational Milestones | | - |
| 11 | | 35,311,992 | | $7.5 trillion | | Achievement of any 11 of the 12 Operational Milestones (1) | | - |
| 12 | | 35,311,992 | | $8.5 trillion | | Achievement of any 12 of the 12 Operational Milestones (1) | | - |
| Total | | 423,743,904 | | | | | | |
(1)The 11th and 12th tranches are earned upon the later of (i) the date on which the last Performance Milestone applicable to such tranche is completed and (ii) the date on which the CEO succession framework developed by our CEO is approved by the Board of Directors.
(2)Market capitalization milestones are measured on a trailing average basis over both a six-month period and a 30-day period. Achievement may also be measured over a one-year period in connection with the deemed achievement of certain product goals.
The operational milestones generally required for any shares to become Earned Shares are defined as follows:
| | | | | | | | |
| Milestone # | | Operational Milestones (3) |
| 1 | | 20 million Tesla vehicles delivered |
| 2 | | 10 million active FSD subscriptions |
| 3 | | 1 million bots delivered |
| 4 | | 1 million Robotaxis in commercial operation |
| 5 | | $50 billion of Adjusted EBITDA |
| 6 | | $80 billion of Adjusted EBITDA |
| 7 | | $130 billion of Adjusted EBITDA |
| 8 | | $210 billion of Adjusted EBITDA |
| 9 | | $300 billion of Adjusted EBITDA |
| 10 | | $400 billion of Adjusted EBITDA (4) |
| 11 | | $400 billion of Adjusted EBITDA (4) |
| 12 | | $400 billion of Adjusted EBITDA (4) |
(3)Adjusted EBITDA is defined as net income (loss) attributable to common stockholders before interest expense, provision (benefit) for income taxes, depreciation, amortization and impairment, stock-based compensation and digital assets gains and losses for the four consecutive quarters that immediately precede such determination date.
(4)Meeting the last three Adjusted EBITDA operational milestones requires achieving Adjusted EBITDA of $400 billion in three non-overlapping periods, each made up of four consecutive quarters.
The vesting date for each tranche of shares depends on when such shares become Earned Shares, which is based on the achievement of Performance Milestones. Generally, shares earned prior to the 5th anniversary of the 2025 CEO Performance Award Grant Date vest on the 7.5th anniversary, and shares that are earned after the 5th anniversary of the 2025 CEO Performance Award Grant Date vest on the 10th anniversary (each such 7.5 and 10-year period, a “Post-Milestone Service Period”), in each case our CEO must maintain continued employment either as our CEO or as an executive officer responsible for product development or operations through the applicable Post-Milestone Service Period (“Eligible Service”). Upon vesting, the vested shares will be reduced by an offset amount of $334.09 per share, unless our CEO elects to pay such amounts in cash.
Unearned Shares will be forfeited and returned upon the 10-year anniversary of the 2025 CEO Performance Award Grant Date. Unvested shares (including any Earned Shares that have not vested) will be forfeited upon cessation of Eligible Service. Any stock-based compensation expense related to forfeited shares will be reversed during the period in which such a forfeiture occurs.
Our CEO must hold shares for five years after they become Earned Shares (regardless of whether such Earned Shares vest), subject to exceptions on or after vesting for (i) a change in control, (ii) satisfying taxes due in respect of vesting or (iii) transfers for estate planning purposes that involve a mere change of form or as may be permitted by our disinterested directors in their discretion consistent with our internal policies.
Stock-based compensation expense recognition commences when an operational milestone is considered probable of achievement regardless of the progress made towards achieving the next market capitalization milestone. The probability of meeting an operational milestone is based on a subjective assessment of the product roadmap, regulatory environment, industry and adoption trends, competitive environment, macroeconomic conditions and risks, and our future financial projections, among other estimates and assumptions. These inputs, which are subjective and generally require significant judgment, are based on historical experience, as appropriate, and on various other assumptions that we believe to be reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. As of March 31, 2026, we determined that the operational milestone involving the delivery of 20 million Tesla vehicles, is probable over the term of the award based on our current assumptions.
Once an operational milestone is considered probable of achievement, stock-based compensation expense associated with the tranche will be recognized over the relevant Post-Milestone Service Period, which is based on the expected achievement date of the operational milestone. By design of this award, the recognition period will be approximately 7.5 or 10 years from the 2025 CEO Performance Award Accounting Grant Date. Stock-based compensation expense associated with this award is recorded as Selling, general and administrative expense on our consolidated statement of operations.
As of March 31, 2026, based on our current estimate of the achievement date, we had unrecognized stock-based compensation expense of $9.97 billion for the operational milestone that was considered probable of achievement over the term of the award, which we expect to be recognized over 9.4 years. As of March 31, 2026, we had unrecognized stock-based compensation expense of $105.82 billion to $120.37 billion for the operational milestones that were considered not probable of achievement. For the three months ended March 31, 2026, we recorded stock-based compensation expense of $260 million related to the 2025 CEO Performance Award.
Other Performance-Based Grants
From time to time, the Compensation Committee of our Board of Directors grants certain employees performance-based restricted stock units and stock options.
As of March 31, 2026, we had unrecognized stock-based compensation expense of $1.84 billion under these grants to purchase or receive an aggregate 13.6 million shares of our common stock. For awards probable of achievement, we estimate the unrecognized stock-based compensation expense of $721 million will be recognized over a weighted-average period of 3.1 years.
For the three months ended March 31, 2026 and 2025, we recorded $136 million and an immaterial amount, respectively, of stock-based compensation expense related to these grants, net of forfeitures, primarily in Research and development in the consolidated statements of operations.
Summary Stock-Based Compensation Information
The following table summarizes our stock-based compensation expense by line item in the consolidated statements of operations (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Cost of revenues | $ | 227 | | | $ | 209 | | | | | |
| Research and development | 421 | | | 277 | | | | | |
| Selling, general and administrative | 382 | | | 87 | | | | | |
| | | | | | | |
| Total | $ | 1,030 | | | $ | 573 | | | | | |
Note 9 – Income Taxes
Our effective tax rate was 34% for the three months ended March 31, 2026 compared to 29% for the three months ended March 31, 2025. The change in our effective tax rate was primarily due to changes in the mix of our jurisdictional earnings and the non-deductibility of stock-based compensation expense related to the 2025 CEO Performance Award.
Our effective tax rates for the three months ended March 31, 2026 and 2025 as compared to the U.S. federal statutory rate of 21% were primarily impacted by the mix of our jurisdictional earnings subject to different tax rates, tax deduction limitations on executive compensation expense, valuation allowances on our deferred tax assets, and benefits from our U.S. research and development credits and manufacturing production credits.
Note 10 – Commitments and Contingencies
Tariffs
In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA). As a result of this ruling, we may be eligible for a refund of tariffs previously paid on imported goods. As the recoverability and timing of any such refund remains uncertain, we have not recognized a receivable and corresponding offset to expense or asset as of March 31, 2026 and will not until such amounts are realized or realizable. We continue to monitor these developments and their potential impact on our results of operations, including reduction of revenue for any potential refunds to certain energy storage customers for which a contractual obligation exists.
Legal Proceedings
Litigation Related to Directors’ Compensation
On June 17, 2020, a purported Tesla stockholder filed a derivative action in the Delaware Court of Chancery, purportedly on behalf of Tesla, against certain of Tesla’s current and former directors regarding compensation awards granted to Tesla’s directors, other than Elon Musk, between 2017 and 2020. The suit asserted claims for breach of fiduciary duty and unjust enrichment and seeks declaratory and injunctive relief, unspecified damages and other relief. Defendants filed their answer on September 17, 2020.
On July 14, 2023, the parties filed a Stipulation and Agreement of Compromise and Settlement, which does not involve an admission of any wrongdoing by any party. Pursuant to the terms of the agreement, Tesla provided notice of the proposed settlement to stockholders of record as of July 14, 2023. The Court held a hearing regarding the settlement on October 13, 2023, after which it took the settlement and Plaintiff’s counsel fees request under advisement. On January 8, 2025, the Court approved the settlement and awarded Plaintiff’s counsel fees in the amount of approximately $176 million. A final judgment was entered by the Court on January 13, 2025.
The Company disagreed with the amount of attorneys’ fees awarded by the court. On February 10, 2025, Tesla appealed the attorneys’ fee award amount to the Delaware Supreme Court. Tesla did not appeal the Delaware Court of Chancery’s approval of the underlying settlement. Also on February 10, 2025, a single shareholder appealed the approval of the settlement. This shareholder’s appeal did not seek to alter any material terms (e.g., financial contributions or the defendants’ obligations under the Settlement Agreement). The Delaware Court of Chancery had previously rejected this shareholder’s objections when approving the Settlement Agreement. On January 30, 2026, the Delaware Supreme Court affirmed the Court of Chancery’s approval of the settlement agreement, resolving the derivative claims related to board compensation. The Court then significantly reduced the attorney fee award from $176 million to $71 million.
Because neither Tesla’s appeal nor the shareholder’s appeal sought to vacate the Settlement Agreement or materially modify its terms, the Company implemented the provisions of the Settlement Agreement in May 2025 by cancelling the options requiring cancellation under its terms.
In connection with the settlement, Tesla received $277 million from certain directors and paid Plaintiff’s counsel fees of $176 million (which, as noted above, the Company appealed) in the three months ended March 31, 2025. We recorded a $31 million reversal of previously recognized stock-based compensation expense in association with the returned awards and increased our provision for income taxes in relation to the return of directors’ compensation. As the settlement was an equity transaction, the net impact to additional paid-in-capital was $110 million in the three months ended March 31, 2025. Following the January 30, 2026 decision by the Delaware Supreme Court, the reduction of attorneys’ fees are recorded to additional paid-in-capital.
Litigation Relating to Potential Going Private Transaction
Between October 17, 2018 and March 8, 2021, seven derivative lawsuits were filed in the Delaware Court of Chancery, purportedly on behalf of Tesla, against Mr. Musk and the members of Tesla’s board of directors, as constituted at relevant times, in relation to statements made and actions connected to a potential going private transaction, with certain of the lawsuits challenging additional Twitter posts by Mr. Musk, among other things. Several of those actions were consolidated. In addition to these cases, two derivative lawsuits were filed on October 25, 2018 and February 11, 2019 in the U.S. District Court for the District of Delaware, purportedly on behalf of Tesla, against Mr. Musk and the members of the Tesla board of directors as then constituted. All of these cases have been dismissed through stipulations and orders.
On October 21, 2022, a lawsuit was filed in the Delaware Court of Chancery by a purported shareholder of Tesla alleging, among other things, that board members breached their fiduciary duties in connection with their oversight of the Company’s 2018 settlement with the SEC, as amended. Among other things, the plaintiff sought reforms to the Company’s corporate governance and internal procedures, unspecified damages, and attorneys’ fees. On March 30, 2026, the plaintiff voluntarily dismissed the case.
Certain Derivative Lawsuits in Delaware
Before converting from a Delaware to Texas corporation on June 13, 2024, three separate derivative actions brought by purported Tesla stockholders were filed in the Delaware Court of Chancery on May 24, June 10 and June 13, 2024, purportedly on behalf of Tesla, against current and former directors regarding topics involving Elon Musk and others, X Corp. (formerly Twitter) and xAI. These suits asserted various claims, including breach of fiduciary duty and breach of contract, and sought unspecified damages and other relief. On August 6, 2024, the plaintiffs in these three actions moved to consolidate the matters into a single case. The Court consolidated two of the three cases. Tesla and the directors filed motions to dismiss, and oral argument on those motions occurred on October 22, 2025. On April 2, 2026, these cases were reassigned to a different judge. On April 13, 2026, the Court granted Tesla’s motions to dismiss and dismissed the cases.
Litigation and Investigations Relating to Alleged Discrimination and Harassment
We are also subject to various lawsuits that assert claims related to alleged discrimination and harassment. For example, on February 9, 2022, the California Civil Rights Department (“CRD,” formerly “DFEH”) filed a civil complaint against Tesla in Alameda County, California Superior Court, alleging systemic race discrimination, hostile work environment and pay equity claims, among others. CRD’s amended complaint seeks monetary damages and injunctive relief. The trial is currently set for July 20, 2026. Additionally, on June 1, 2022, the Equal Employment Opportunity Commission (“EEOC”) issued a cause finding against Tesla that closely parallels the CRD’s allegations. On September 28, 2023, the EEOC filed a civil complaint against Tesla in the United States District Court for the Northern District of California asserting claims for race harassment and retaliation and seeking, among other things, monetary and injunctive relief. The case is in discovery with no trial date set. In another matter, on November 13, 2017, a putative class action was filed against Tesla in Alameda County Superior Court, alleging race discrimination, including allegations that Tesla created a hostile work environment by failing to take necessary steps to prevent race-based harassment and by failing to take corrective action once the alleged harassment occurred. On May 17, 2024, the court certified the case as a class action on limited issues, but on November 17, 2025, the court decertified the class. Trials of the three remaining named plaintiffs are scheduled to begin on May 11, 2026, and will proceed one after the other.
The Company intends to vigorously defend itself in these matters; however, we cannot predict the outcome or impact. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, unless noted.
Other Litigation Related to Our Products and Services
We are also subject to various lawsuits that seek monetary and other injunctive relief. These lawsuits include proposed class actions and other consumer claims that allege, among other things, purported defects and misrepresentations related to our products and services. For example, on September 14, 2022, a proposed class action was filed against Tesla, Inc. and related entities in the U.S. District Court for the Northern District of California, alleging various claims about the Company’s driver assistance technology systems under state and federal law. This case was later consolidated with several other proposed class actions, and a Consolidated Amended Complaint was filed on October 28, 2022, which seeks damages and other relief on behalf of all persons who purchased or leased from Tesla between January 1, 2016, to the present. On March 22, 2023, the plaintiffs filed a motion for a preliminary injunction to order Tesla to (1) cease using the term “Full Self-Driving Capability” (FSD Capability), (2) cease the sale and activation of FSD Capability and deactivate FSD Capability on Tesla vehicles, and (3) provide certain notices to consumers about proposed court-findings about the accuracy of the use of the terms Autopilot and FSD Capability. Tesla opposed the motion. On September 30, 2023, the Court denied the request for a preliminary injunction, compelled four of five plaintiffs to arbitration, and dismissed the claims of the fifth plaintiff with leave to amend the complaint. On October 31, 2023, the remaining plaintiff filed an amended complaint, which Tesla moved to dismiss, and on May 15, 2024, the Court granted in part and denied in part Tesla’s motion. On May 6, 2025, the plaintiff filed a motion for class certification, which Tesla opposed, and on August 18, 2025, the Court certified a limited class comprised of California consumers who are not subject to an arbitration agreement. On September 1, 2025, Tesla filed a petition in the United States Court of Appeals for the Ninth Circuit for permission to appeal the class certification order, and on December 18, 2025, the Ninth Circuit granted Tesla’s petition. On January 5, 2026, the district court stayed the case pending resolution of the proceedings before the Ninth Circuit. Tesla filed its opening brief in the Ninth Circuit on March 12, 2026, and the plaintiff filed a response brief on April 13, 2026.
On August 4, 2025, a proposed class action was filed in the U.S. District Court Western District of Texas against Tesla, Inc., Elon Musk, and certain current and former Company executives. The complaint alleges that the defendants violated federal securities laws through alleged material misrepresentations in public filings regarding the effectiveness of Autopilot, Full-Self Driving (Supervised), and Robotaxi. The complaint seeks monetary damages and other relief on behalf of persons who purchased Tesla stock between April 19, 2023, and June 22, 2025. The plaintiffs filed an amended complaint on February 17, 2026, and Tesla moved to dismiss the amended complaint on April 20, 2026.
The Company intends to vigorously defend itself in these matters; however, we cannot predict the outcome or impact. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, unless noted.
Benavides v. Tesla, Inc.
On August 1, 2025, a jury in the U.S. District Court for the Southern District of Florida reached a verdict in a product liability trial relating to certain allegations regarding the use of our Autopilot technology in a 2019 accident that resulted in a fatality and injuries. The jury awarded $129 million in total compensatory damages, finding the driver 67% at fault and the Company 33% at fault. The jury also awarded $200 million in punitive damages. On September 15, 2025, the Company filed a post-trial motion for judgment as a matter of law or, in the alternative, a new trial on all issues or an amended judgment to lesser compensatory and punitive damages. On February 19, 2026, the Court denied the Company’s post-trial motions, and on March 16, 2026, the Company filed a notice of appeal with the U.S. Court of Appeals for the Eleventh Circuit. Although we believe that the facts and law do not justify the damages awarded, the Company has recorded an immaterial accrual.
We have experienced, and we expect to continue to face, claims and regulatory scrutiny arising from or related to misuse or claimed failures or alleged misrepresentations of new technologies that we are pioneering. We are unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, unless noted. An unfavorable outcome in some or all of these proceedings could have a material adverse impact on results of operations or cash flows for a particular period. Our view of these matters is subject to inherent uncertainties and may change in the future.
Certain Investigations and Other Matters
We regularly receive requests for information, including subpoenas, from regulators and governmental authorities such as the National Highway Traffic Safety Administration, the National Transportation Safety Board, the SEC, the Department of Justice (“DOJ”), and various local, state, federal, and international agencies. The ongoing requests for information include topics such as operations, technology (e.g., vehicle functionality, vehicle incidents, Autopilot and FSD Capability and Robotaxi), compliance, finance, data privacy, and other matters related to Tesla’s business, its personnel, and related parties. We routinely cooperate with such formal and informal requests for information, investigations, and other inquiries. To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred. We cannot predict the outcome or impact of any ongoing matters. Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, financial position or brand.
We are also subject to various other legal proceedings, risks and claims that arise from the normal course of business activities. If an unfavorable ruling or development were to occur in these or other possible legal proceedings, risks and claims, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, financial position or brand.
Note 11 – Variable Interest Entity Arrangements
The aggregate carrying values of the variable interest entities’ assets and liabilities, after elimination of any intercompany transactions and balances, in the consolidated balance sheets were as follows (in millions):
| | | | | | | | | | | |
| March 31,
2026 | | December 31,
2025 |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 91 | | | $ | 109 | |
| Accounts receivable, net | 13 | | | 11 | |
| Prepaid expenses and other current assets | 173 | | | 198 | |
| Total current assets | 277 | | | 318 | |
| Operating lease vehicles, net | 415 | | | 456 | |
| Energy generation and storage systems, net | 2,146 | | | 2,177 | |
| Other non-current assets | 154 | | | 183 | |
| Total assets | $ | 2,992 | | | $ | 3,134 | |
| Liabilities | | | |
| Current liabilities | | | |
| Accrued liabilities and other | $ | 32 | | | $ | 49 | |
| Deferred revenue | 6 | | | 6 | |
| Current portion of debt and finance leases | 1,189 | | | 1,364 | |
| Total current liabilities | 1,227 | | | 1,419 | |
| Deferred revenue, net of current portion | 59 | | | 60 | |
| Debt and finance leases, net of current portion | 1,293 | | | 1,679 | |
| Total liabilities | $ | 2,579 | | | $ | 3,158 | |
Note 12 – Related Party Transactions
Tesla periodically does business with certain entities with which its CEO and directors are affiliated, such as SpaceX, The Boring Company and Redwood Materials, in accordance with our Related Person Transactions Policy. In the three months ended March 31, 2026, we recognized $87 million of revenues and $65 million of cost of revenues from SpaceX for its purchase of our Megapack products in the ordinary course of business. Other transactions with SpaceX and other related parties in the three months ended March 31, 2026 were immaterial. Transactions with related parties were immaterial for the three months ended March 31, 2025.
As previously disclosed and upon receiving the applicable regulatory approvals, the Company invested $2.00 billion in SpaceX common stock (formerly a preferred share investment in xAI) representing an ownership interest of less than 1% in March 2026. We have determined that under the applicable accounting standards, we are presumed to have significant influence over SpaceX and as such, we account for this investment using the equity method of accounting. Refer to Note 1, Summary of Significant Accounting Policies, regarding the fair value policy election in relation to the equity investment.
Note 13 – Segment Reporting and Information about Geographic Areas
We have two operating and reportable segments: (i) automotive and (ii) energy generation and storage. The following table presents revenues, cost of revenues and gross profit by reportable segment (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| Automotive segment | | | | | | | |
| Revenues | $ | 19,979 | | | $ | 16,605 | | | | | |
| Cost of revenues (1) | $ | 16,211 | | | $ | 14,237 | | | | | |
| Gross profit | $ | 3,768 | | | $ | 2,368 | | | | | |
| Energy generation and storage segment | | | | | | | |
| Revenues | $ | 2,408 | | | $ | 2,730 | | | | | |
| Cost of revenues (2) | $ | 1,456 | | | $ | 1,945 | | | | | |
| Gross profit | $ | 952 | | | $ | 785 | | | | | |
(1)Depreciation and amortization included in Cost of revenues for the automotive segment for the three months ended March 31, 2026 and 2025 was $1.02 billion and $954 million, respectively.
(2)Depreciation and amortization included in Cost of revenues for the energy generation and storage segment for the three months ended March 31, 2026 and 2025 was $95 million and $83 million, respectively.
The following table presents revenues by geographic area based on the sales location of our products (in millions):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2026 | | 2025 | | | | |
| United States | $ | 10,677 | | | $ | 10,333 | | | | | |
| China | 4,184 | | | 4,303 | | | | | |
| Other international | 7,526 | | | 4,699 | | | | | |
| Total | $ | 22,387 | | | $ | 19,335 | | | | | |
The following table presents long-lived assets by geographic area (in millions):
| | | | | | | | | | | |
| March 31,
2026 | | December 31,
2025 |
| United States | $ | 38,360 | | | $ | 35,847 | |
| Germany | 4,750 | | | 4,775 | |
| | | |
| Other international | 4,668 | | | 4,625 | |
| Total | $ | 47,778 | | | $ | 45,247 | |
The following table presents inventory by reportable segment (in millions):
| | | | | | | | | | | |
| March 31,
2026 | | December 31,
2025 |
| Automotive | $ | 10,880 | | | $ | 9,678 | |
| Energy generation and storage | 3,554 | | | 2,714 | |
| Total | $ | 14,434 | | | $ | 12,392 | |
Note 14 – Subsequent Events
In April 2026, the Company entered into an agreement to acquire an AI hardware company for up to $2.00 billion in Tesla common stock and equity awards, of which approximately $1.8 billion is subject to certain service conditions and/or performance milestones dependent on the successful deployment of the company's technology.
