April 20 (Reuters) - Tesla's solar and energy business is likely to outshine the EV maker's challenged core business when it reports quarterly results this week, a sign of resilience as Tesla progresses slowly in its turn to robots and self-driving technology.
CEO Elon Musk's plans to build new assembly lines and produce robots are expected to cost $20 billion this year and drive Tesla to its first quarter of negative cash flow in two years.
Tesla's vehicle profitability has shrunk from its peaks, while high-margin regulatory credits, once a key profit driver, have declined following policy changes in the United States under CEO Elon Musk's ally, President Donald Trump.
But the energy business is faster growing and roughly twice as profitable as Tesla's ageing lineup of cars, thanks to demand for large-scale battery systems to power data centers.
"The honest summary: energy storage is cushioning the blow but not yet large enough to fully offset the combined pressure from both the (regulatory) credit cliff and automotive margin erosion. The trajectory is encouraging; the current magnitude is still insufficient," said Adrian Balfour, founder and chairman of advisory firm Envorso.
Wall Street estimates the unit will generate about $18.3 billion in revenue in 2026, up from $12.8 billion in 2025, with gross profit rising to roughly $5.3 billion and margins holding near 29%, according to Visible Alpha data.
The unit's revenue will account for about a fifth of expect total revenue this year.
For the quarter that Tesla is reporting on after markets close on April 22, analysts estimate that the energy business will grow 25%, beating a 12% rise in automotive revenue and a 23% increase in services. Negative cash flow, or cash burn, is expected to be $1.44 billion.
NO MORE A SIDE BUSINESS
Tesla's roughly $1.5 trillion valuation rests on products that don't yet exist, including robots and fully self-driving cars.
Still, quarterly sales for the energy division remain uneven.
"That tends to be a lumpy business, so it is hard to read too much into it until we get more detail on the next earnings call," said Matt Britzman, senior equity analyst, Hargreaves Lansdown, who personally owns Tesla shares.
In the first quarter of 2026, energy storage deployments were 8.8 gigawatt-hours, down 15% from a year earlier. However, revenue for the segment is expected to rise as Tesla focuses on selling more profitable products.
"A growing percentage of deployments is coming from large utility-scale Megapacks, which are much more lucrative than smaller residential Powerwalls or lower-priced systems," said Scott Acheychek, COO of ETF-issuer REX Financial.
Investors will want to hear how the energy business is responding to industrywide challenges. "While growth beyond the first quarter is likely to stay strong, margins may come under pressure due to pricing competition and delays in passing on higher tariff costs," Morgan Stanley analysts said.
(Reporting by Akash Sriram in Bengaluru; Editing by Pooja Desai and Peter Henderson)
