The company's adjusted profit was $1.92, versus estimates of $2.20 per share.
The Silicon Valley electric carmaker said it made a net profit of US$139.5 million in the three months ended December 31, compared with a US$311.5 million profit in the third quarter, when it benefited from regulatory credits.
Wall Street is expecting profits to fall compared to last quarter.
The quarterly profit was less than half of the $311.5 million the company had earned in the three months to September. Musk pledged at the time it was a sign of more healthy earnings to come.
Tesla credited strong demand for its Model 3, manufacturing improvements and recent cost cuts for the turnaround.
This month Tesla also started building a Gigafactory in Shanghai.
The Y is apparently completed, designed out, and shares 75 percent of its build and design with the Model 3, so it should be easier to ramp up, Musk said.
Shares of the company fell almost 3 percent as Tesla missed analysts' expectations for quarterly profit. "It is critical that we continue this trend so that we can keep increasing the affordability of Model 3 while retaining a sustainable level of profitability", the company said in a statement. Last year, the automaker attributed logistical problems to reports that lots full of Model 3s waiting for delivery inflated the automaker's claims of achieving 5,000 Model 3s per week.
Tesla is pumping money into the Shanghai factory, which it hopes to bring on line at the end of this year with a target of producing 500,000 vehicles annually.
Regarding its huge pile of debt, Tesla said it has enough cash to meet its obligations.
Profit was down from last quarter when Tesla made 300 million dollars in Q3.
Musk on January 18 announced thousands of layoffs and said Tesla was looking for a "tiny profit" in the first quarter - "with great difficulty, effort and some luck".
With about three quarters of the Model Y components exactly the same as the Model 3, Musk says Model Y production will cost much less to prepare for than say, the difference between the Model S and the Model X.
Based on management's previous commentary, results for the fiscal first quarter could also come in soft. Musk has saidTesla suffered with logistical issues as it rushed to deliver Model 3 vehicles to customers after solving production backlogs.
Tesla didn't address those critics but said it would continue to develop its own delivery network throughout 2019.