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 horrible one.

Last year, the company’s profit fell 45% compared with 2024, driven in large part by falling sales of its electric vehicles. Investors anticipated the decline in sales, but Tesla still beat Wall Street earnings and revenue estimates thanks to its energy storage business.

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

Big, stationary batteries like the Megapack and Powerwall, along with solar installations, now drive nearly a quarter of Tesla’s gross profit. Last quarter alone, the Megapack contributed $1.1 billion of the storage business’ $3.8 billion in gross profit for the entire year. Storage and energy generation revenues were up 26.5% to $12.8 billion.

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

Storage will likely play a larger role in the company’s near future, too.

Large energy storage projects, like those installed for utilities or data centers, tend to be milestone-based, and revenue from the projects is recognized when certain milestones are achieved. In its 10-K filing with the SEC, 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.

Some hurdles lie ahead, though.

The One Big Beautiful Bill Act (OBBBA) phased out tax credits for residential energy storage systems like the Powerwall, though commercial tax credits for the Megapack and Megablock products will continue through the mid-2030s. Tariffs and provisions in the OBBBA also threaten to increase battery cell prices, the company said. Sales were up because volumes were up, but the average selling price of a Megapack was down, suggesting increased competition in the energy storage market.

Yet 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 energy when it is needed most and provide additional power capacity,” the company said in its earnings report.