Megapack deployments grew roughly 90% year on year in 2025 and the gross margin on the energy segment is now higher than auto. The market is still paying for the car company.
Quietly, somewhere between the auto-delivery noise and the robotaxi rollout, Tesla's energy storage segment has become the highest gross-margin business inside the company. On our read of the most recent quarterly disclosures, the energy segment produced gross margin in the low-30s percent range, several hundred basis points above the core auto business, and is growing at roughly 90% year on year in megawatt-hours deployed.
That is not a side story. That is the thesis shifting under the market's feet. For six years the entire Tesla bull case has hinged on vehicle unit growth, then on robotaxi optionality. The energy business was treated as a rounding error. It is no longer a rounding error, and the market has not yet rerated for it.
The Signals Desk view is that energy storage will cross 15% of Tesla's total gross profit in 2026 and 20% by 2027. At those mix levels, the company's consolidated gross margin profile changes, and the appropriate valuation multiple shifts upward.
The Megapack factory in Lathrop, California ramped to full capacity in 2024. A second factory in Shanghai began shipping in the second half of 2024. Combined nameplate capacity is roughly 80 GWh per year, and utilisation has climbed steadily. Tesla's Q4 2024 energy deployments were around 11 GWh; by Q3 2025 the quarterly run-rate was above 15 GWh. The 2025 full-year number is likely to land between 55 and 60 GWh, up from 31 GWh in 2024.
The demand side has surprised even optimistic observers. Grid operators in Australia, Texas, and California have contracted for multi-year delivery schedules. Hyperscale data-centre operators have begun ordering Megapack fleets to support local grid stabilisation around AI training campuses. The backlog at the start of 2026 stretched into 2027.
Pricing power is the interesting part. The Megapack ASP has held roughly flat year on year despite lithium carbonate spot prices falling 40% over the same period. That means the gross margin has been expanding quarter on quarter, and the expansion is accelerating.
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Three reasons the energy story is under-owned.
First, segment reporting delays. Tesla's financial disclosures aggregate energy and storage in a way that obscures the pure Megapack economics. Analysts have to reverse-engineer the margin profile from scattered datapoints in the shareholder letter. Most do not bother.
Second, the auto narrative is still louder. Unit deliveries, pricing wars with BYD, and the FSD rollout dominate analyst models and headlines. A 90% growth rate in energy is a small dataset compared with two million vehicle deliveries per year.
Third, the end-market is harder to forecast. Grid-scale energy storage demand depends on regulatory tailwinds, data-centre build-outs, and renewable capacity additions. All three are growing, but none of them moves on a quarterly cadence that fits analyst models.
Historically, when a segment quietly moves from 5% to 20% of a conglomerate's gross profit over three years, the stock re-rates roughly 25 to 40% on the mix-shift alone, independent of headline revenue. The precedent is AWS inside Amazon between 2015 and 2018.
Megapack is not alone in the grid-scale battery market. Fluence, Wartsila, and CATL all compete. But Tesla has three structural advantages that rarely get priced in.
Manufacturing vertical integration. Tesla makes its own cells for Megapack at scale, which gives it control over cost curves that contract manufacturers cannot match. As lithium prices fall, Tesla captures more of the benefit than peers.
Software differentiation. The Autobidder platform layered on top of Megapack lets grid operators participate in energy markets automatically. That is a recurring software margin on top of the hardware sale, and it is a barrier that Fluence and others have been slow to close.
Deployment speed. Tesla has installed more grid-scale storage in Australia and Texas than any competitor, and those reference projects drive repeat orders. The time from signed contract to energised site is roughly half what it was three years ago.
By comparison, Fluence's most recent quarter showed gross margin in the high-teens and deployment growth in the low-30s percent range. Tesla is growing faster, at higher margin, with a better software attach.
Assume 2026 energy revenue of $22 billion at a 32% gross margin. That is $7 billion of gross profit. Even a conservative 8x gross-profit multiple on the segment, consistent with how the market values grid-infrastructure businesses, implies $56 billion of enterprise value for energy alone. Tesla's total enterprise value at current prices is roughly 11x that figure.
The auto business is the rest. At 2026 auto revenue of roughly $95 billion and an 18% gross margin, auto gross profit is $17 billion. Applied at a 10x gross-profit multiple (consistent with premium auto peers plus some FSD optionality), that is $170 billion.
Sum the parts: $56 billion for energy plus $170 billion for auto is roughly $226 billion of operating value, before FSD monetisation and robotaxi optionality. Current enterprise value is meaningfully above that, which is where the bulls' FSD call resides.
The pattern here is worth watching. When AWS crossed 15% of Amazon's gross profit in 2017, the stock was still priced as a retailer. Over the next 18 months, the market revalued the entire company as a cloud infrastructure business plus a retailer, and the stock rose roughly 90%. The cross-over timing is similar for Tesla's energy business in 2026.
Lithium volatility is the largest exogenous risk. If spot lithium prices re-inflate, Megapack margins compress quickly because the contract backlog has limited pass-through provisions. A 30% spot-lithium move would cost roughly 400 basis points of segment gross margin.
Competition from CATL's grid storage business is the second risk. CATL's battery cost is structurally lower than Tesla's on standardised product, and a aggressive push into US and European storage would compress price.
Execution risk on the third factory (rumoured for Europe) is the third risk. If the capacity expansion slips by four quarters, the 2027 deployment ramp compresses.
None of these are thesis-breaking. All are worth watching.
We are buyers of Tesla on the energy storage thesis, not the autonomy thesis. The energy segment is growing 60 to 90% a year at a 30%+ gross margin in a demand environment that has no visible ceiling. The market is still paying for the car company and getting the infrastructure company for free.
On sum-of-the-parts math, the stock is fairly valued to slightly rich on operating segments alone and cheap if you give credit for even modest FSD monetisation. We think the bigger catalyst over the next 12 months is the mix shift becoming visible in consolidated gross margin, not a robotaxi announcement.
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