Tesla's $99-a-Month FSD Plan Is on Pace to Generate $1.8 Billion a Year. Is This New Profit Lever a Signal to Buy the Elon Musk-Led Stock?
Prosper Junior Bakiny, The Motley Fool
Sat, August 1, 2026 at 8:35 AM GMT+3 4 min read
Tesla (NASDAQ: TSLA) is not having a good year. The company's shares took a major dip after it reported its second-quarter earnings on July 22, and they are down 28% to date. Tesla's results weren't terrible, but the company's capex is growing rapidly and squeezing profits and margins. Many investors fear that this spending won't yield the return Tesla expects. However, several aspects of the business are progressing steadily, including its supervised Full Self-Driving (FSD) subscriptions. Is that a good enough reason to buy the stock?
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It could be a game changer, but there are risks
Tesla ended the second quarter with 1.48 million active FSD subscriptions, up 56% from the year-ago period. At $99 per month, that works out to about $1.8 billion per year. That still represents a fairly small percentage of the company's annual revenue, which was about $94.8 billion last year. However, Tesla's FSD subscriptions generate significantly higher margins than its core electric vehicle (EV) business. So, this segment should represent a larger share of operating profits than it does revenue. Further, there are at least two reasons to be excited about the future of this business.
First, as Tesla points out, FSD subscriptions are increasingly popular. As the company's CEO, Elon Musk, said: "We're seeing in locations that have FSD approved, we're seeing a very high take rate of FSD." He went on to say that consumers want the FSD software with whatever car it's paired with, a dynamic that could drive sustained demand for the company's EVs as it earns approvals for its FSD software in more places. Second, Tesla's FSD global fleet has racked up more than 12 billion cumulative miles on the road.
There is a network effect going on here. The more drivers in its ecosystem, the more data from real-world conditions it has to train and improve its FSD software, which in turn attracts even more drivers. Tesla's robotaxi service can also benefit from a growing number of FSD subscriptions for the same reason, and that's where the company's long-term opportunity lies. If it can scale its fleet of robotaxis within the next year and, perhaps, close the gap with one of its biggest competitors, Waymo, Tesla's stock could rebound.
Does any of this make the stock a buy? There is considerable uncertainty regarding Tesla's ability to scale its robotaxi service, secure additional FSD approvals in other regions, and train its software. In the meantime, the company's financial results may remain unimpressive, particularly on the bottom line, as it doubles down on spending to capitalize on potential opportunities. The stock is risky and will be volatile, whichever way it moves. Investors should consider that before even thinking about initiating a position in Tesla.
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Prosper Junior Bakiny 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.
Tesla's $99-a-Month FSD Plan Is on Pace to Generate $1.8 Billion a Year. Is This New Profit Lever a Signal to Buy the Elon Musk-Led Stock? was originally published by The Motley Fool
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