Tesla reports $600 million bitcoin profit jump after digital assets rule change
- Tesla's net income was boosted by a recent change in how companies account for their holdings of digital currencies.
- "Net income in Q4 was impacted by a $600 million mark-to-market benefit from bitcoin due to the adoption of a new accounting standard for digital assets," Tesla said.
- The company reported disappointing earnings and sales as auto revenue dropped by 8% from a year earlier.
Tesla's bitcoin holdings led to a big pop in reported net income for the fourth quarter because of a new rule change in how companies account for digital assets.
After showing a carrying value of $184 million in digital assets for the prior four quarters, the number suddenly jumped to $1.08 billion in the December period, Tesla reported in its earnings release on Wednesday.
The increase followed a recent policy change from the Financial Accounting Standards Board, which mandates that corporate digital asset holdings be marked to market each quarter starting at the beginning of 2025. Before the FASB rule change, companies owning bitcoin had to report their holdings at the lowest value recorded during their ownership, regardless of any subsequent price gain.
Tesla said in its earnings deck that the change resulted in an earnings per share boost of 68 cents in the quarter, and CFO Vaibhav Taneja noted on the earnings call that the net income increase was $600 million.
"It's important to point out that the net income in Q4 was impacted by a $600 million mark-to-market benefit from bitcoin due to the adoption of a new accounting standard for digital assets," Taneja said.
At the end of the third quarter, Tesla's bitcoin holdings were recorded at a carrying value of $184 million, though their fair market value was significantly higher at $729 million. That means the actual increase in the value of its holdings in the period was about $347 million, reflecting bitcoin's fourth-quarter rally.
Much of the recent gain in bitcoin is tied to optimism surrounding the second Trump administration, which was heavily backed by the crypto industry. Tesla CEO Elon Musk was Trump's biggest financial supporter and is now a top adviser in the White House. Longtime Musk ally David Sacks was tapped by Trump to the be the White House AI and crypto czar.
Bitcoin tracking website Bitcoin Treasuries ranks Tesla as the sixth-biggest holder of bitcoin among public companies.
Tesla's fourth-quarter earnings and revenue fell short of analysts' expectations on Wednesday as auto revenue dropped 8% from a year earlier, yet the stock climbed in after-hours trading.
— CNBC'S Lora Kolodny contributed to this report.