By Claudia Assis

Tesla says it sold about 75% of its bitcoin holdings

Tesla Inc. late Wednesday reported second-quarter earnings above Wall Street projections, defying expectations that COVID-related shutdowns in China would hurt its bottom line, thanks to vehicle price increases and selling of most of its bitcoin.

The quarter was challenging, but "we have the potential for a record-breaking second half of the year," barring force majeure and other problems out of the EV maker's control, Chief Executive Elon Musk said in a call after the results. "It has been supply-chain hell for several years."

Tesla (TSLA) said it earned $2.3 billion, or $1.95 a share, in the second quarter, compared with $1.1 billion, or $1.02 a share, in the second quarter of 2021. Adjusted for one-time items, the company earned $2.27 a share.

Sales rose 42% to $16.9 billion from $12 billion a year ago, thanks to increased sales, higher average selling prices and growth in other parts of the business, Tesla said in its letter to investors

Analysts polled by FactSet expected Tesla to report adjusted earnings of $1.81 a share on sales of $16.5 billion.

"From our perspective, this was perhaps Tesla's most impressive quarter in years considering the daunting challenges it faced," which included supply-chain issues, COVID-19 disruptions in Shanghai, and startup costs in Austin and Berlin, CFRA analyst Garrett Nelson told MarketWatch.

"Guidance that the Fremont and Shanghai factories both achieved their highest-ever monthly production and it is focused on a record-breaking second half of 2022 was further music to the bulls' ears," Nelson said.

Tesla said it faced "challenges" with shutdowns and limited production in Shanghai, but ended the quarter "with the highest vehicle production month in our history."

Headwinds also included higher raw-material and logistics costs, including expenses expediting parts, impact from the stronger dollar and a "bitcoin impairment."

Tesla ended the quarter with $18.9 billion in cash and equivalents. It said it converted about 75% of its bitcoin purchases into what it called "fiat currency," with realized gains offset by impairment charges of $106 million, Chief Financial Officer Zach Kirkhorn said on the call. Tesla also incurred restructuring charges related to targeting layoffs and workforce reductions, Kirkhorn said.

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Tesla's free cash flow was "a little soft" compared with expectations, "but understandable given supply-chain disruption," Joseph Spak with RBC said in a note after the results.

The second quarter "seems to be the near-term nadir with (Tesla) focused on 'a record-breaking second half of 2022,'" Spak said.

Shares gained 1.5% in after-hours trading following the report. The stock ended the regular trading day up 0.8%.

When asked by an analyst about his role at Tesla and whether it would change in the next three or four years, Musk said he will "work at Tesla as long as I can usefully advance the cause of sustainability and autonomy."

Going into the results, Wall Street worried that second quarter would be a difficult one thanks to ongoing supply-chain snags, slower production ramps in Tesla's factories in Austin, Texas, and Berlin, Germany, and pandemic-related shutdowns sidelining Tesla's factory in Shanghai.

In a letter to shareholders accompanying the results, Tesla appeared to temper expectations for the production ramps in Austin and Berlin.

The pace of production in the two factories will be "influenced by the successful introduction of many new product and manufacturing technologies in new locations and ongoing supply-chain related challenges. Factory ramps take time" and these two will be no different, Tesla said.

The company said it was "making progress" on the Cybertruck, its electric pickup truck, which is to be made in Austin after the Model Y production ramp there. On the call, Musk reiterated that Tesla was on track to start Cybertruck production in mid 2023.

Tesla earlier this month reported a quarter-on-quarter fall in deliveries, its proxy for sales, leading some analysts to cut their expectations for the EV maker's quarter

Tesla shares have lost 30% this year, compared with losses of around 17% for the S&P 500 index .