Tesla’s energy storage business is growing faster than any other part of the company

Tesla’s energy storage business saved a dismal earnings report from turning into a dire one.

Company profits last year It decreased by 45% compared to 2024largely driven by declining sales of its electric vehicles. Investors expected sales to decline, but Tesla still beat Wall Street’s earnings and revenue thanks to its energy storage business.

Tesla deployed a record 46.7 gigawatt-hours of energy storage products in 2025, an increase of 48% from last year, according to official company filings.

Large, stationary batteries like the Megapack and Powerwall, along with solar installations, now generate nearly a quarter of Tesla’s total profits. In the most recent quarter alone, Megapack contributed $1.1 billion to the storage business’s total profit of $3.8 billion for the full year. Storage and power generation revenues rose 26.5% to $12.8 billion.

These batteries and solar panels are also very profitable, with a gross profit margin of 29.8%, nearly double what Tesla earns selling cars and trucks.

Storage is likely to play a larger role in the company’s near future as well.

Large energy storage projects, such as those installed for utilities or data centers, tend to be milestone-based, and revenue from projects is recognized when certain milestones are achieved. In its 10-K filing with the Securities and Exchange Commission, Tesla said it expects to recognize $4.96 billion this year in deferred revenue from projects already underway. That’s more than double what the company recognized in deferred revenue from storage projects in 2025.

However, there are still some obstacles ahead.

The One Big Beautiful Bill Act (OBBBA) phased out tax breaks for residential energy storage systems like Powerwall, although commercial tax breaks for Megapack and Megablock products will continue until the mid-2030s. Tariffs and provisions in the OBBBA also threaten to increase battery cell prices, the company said. Sales rose due to higher volumes, but the average selling price of a Megapack fell, indicating increased competition in the energy storage market.

However, overall, Tesla remains optimistic about the storage business.

“Despite these challenges, as AI infrastructure drives rapid load growth, we see opportunities for our energy storage products to stabilize the grid, shift power when it’s needed most and provide additional power capacity,” the company said in its earnings report.