Tesla's FSD subscription bet pays off — services revenue hits record margins at $4.58B

In February, Tesla effectively killed the one-time FSD purchase option (once as high as $15,000, later cut to $8,000) and moved to a $99-a-month subscription-only model. Teslarati noted after Wednesday's earnings call that the switch is "paying off big time."

Q2's Services and Other segment brought in $4.58B, up 50% year-over-year, with record gross profit and margin for that category. The segment also includes things like out-of-warranty repairs, but executives pointed to growing FSD subscriptions as a key driver.

FSD subscribers reached 1.48 million, up 56% year-over-year — 55% of whom bought the software outright in the past, with the remaining 45% (roughly 666,000) on the current subscription plan. In North America, roughly 55% of new deliveries had FSD activated at the time of delivery. Measured against Tesla's 9.7 million cumulative lifetime deliveries, the overall FSD take rate hit 15.2% in Q2, up from around 14% in Q1.

Tesla doesn't break out FSD subscription revenue separately. But a back-of-the-envelope calculation — subscriber count times the $99 monthly fee — puts potential annualized recurring revenue (ARR) at roughly $1.8B, a figure Tesla watchers are circulating rather than one the company has confirmed.

With EPS missing consensus and margins under pressure elsewhere in the report, the growing subscription software business stands out as one of the few positive signals reducing Tesla's reliance on hardware sales alone.