Tesla's Business Has Become Much More Diversified in Just the Past Five Years. Does That Make Its Stock a Better Buy Today?

Tesla (NASDAQ: TSLA) is known for its electric vehicles (EVs), and while they are still its bread and butter, the company has been evolving and diversifying its operations over the years. That can make it less susceptible to market conditions and growing competition.

Here's a look at how much more diversified Tesla's business has become in recent years, and whether that could make it a better growth stock to own in the long run.

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More than one-quarter of its top line now comes from non-automotive revenue

In 2025, Tesla generated $94.8 billion in total revenue. This included $69.5 billion from automotive revenue and $12.8 billion from its energy generation and storage segment, and another $12.5 billion from services and other. That means that roughly 27% of its top line is derived from sources outside of auto sales.

That's a big transformation in just five years. Back in 2021, automobile revenue totaled $47.2 billion and accounted for 88% of the top line, with the remaining 12% coming from its other segments, which combined for $6.6 billion.

Without that diversification, Tesla's numbers for the past year may have looked much worse than they did. That's because automobile revenue declined by 10%, while the services segment grew by 19%, and the company's energy generation and storage business unit increased sales by 27%. Tesla's non-core business segments have helped offset some of the slowdown in its core automotive business.

Does this make Tesla a better (and safer) stock to own?

Diversifying into other segments and product lines can be beneficial for a business and lead to greater long-term stability. However, investors primarily invest in Tesla's stock for its growth potential in EVs and in the emerging robotaxi market, not for energy generation and storage. If that were the case, it would surely command a lower price-to-earnings multiple than the more than 300 times earnings it trades at today.

Moreover, the diversification hasn't helped thwart another big issue -- diminishing margins. At 18%, the company's gross profit margin was still significantly lower this past year than the 25% margin it achieved in 2021 when auto sales made up a bigger chunk of its business.

As a business, Tesla may be stronger with more complementary products and services now a part of its operations, but the stock itself remains incredibly expensive. And with margins remaining low and competition intensifying in the EV market, it's hard to see a path for its financials to significantly improve in the near future, to the point where its high valuation could be justified.

Tesla is a stock worth tracking, and I'd keep it on a watch list, but it has too much downside risk to be a safe buy right now.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.