Earnings top forecasts as auto sales remain under pressure
Tesla reported better-than-expected fourth-quarter results after market close on Wednesday, even as the company posted its first-ever annual revenue decline. Shares rose 2% in extended trading following the announcement.
The electric vehicle maker delivered adjusted earnings per share of 50 cents, above the 45 cents expected by analysts. Revenue reached $24.90 billion, narrowly beating consensus estimates of $24.79 billion.
Revenue falls as competition intensifies
Despite the quarterly beat, Tesla’s revenue declined 3% year over year in the fourth quarter, falling to $24.90 billion from $25.7 billion a year earlier. Automotive revenue dropped 11% to $17.7 billion, reflecting weaker vehicle sales.
For the full year, Tesla reported revenue of $94.8 billion, down from $97.7 billion in 2024. The company attributed the decline to lower vehicle deliveries and reduced regulatory credit revenue.
Earlier this month, Tesla disclosed a 16% drop in fourth-quarter deliveries and an 8.6% decline for the full year, underscoring the challenges facing its core auto business amid rising global competition, particularly from Chinese rival BYD.
Lineup changes and political headwinds
CEO Elon Musk acknowledged that part of the pressure stems from Tesla’s aging vehicle lineup. During the earnings call, he announced plans to end production of the Model S and Model X, vehicles first introduced in 2012 and 2015.
Some of Tesla’s difficulties in 2025 have also been linked to consumer backlash tied to Musk’s political activity and close association with U.S. President Donald Trump, which weighed on brand perception in several markets.
Strategic pivot toward autonomy and robotics
As auto sales slow, Musk is increasingly positioning Tesla as an artificial intelligence and robotics company. The firm plans to repurpose factory lines in Fremont, California, previously used for the Model S and X, to produce its Optimus humanoid robots.
Tesla CFO Vaibhav Taneja said the company expects roughly $20 billion in capital expenditures this year, driven by investments in new factories, artificial intelligence infrastructure and robotics development.
The company is expanding its Robotaxi pilot program, which is already operating in Austin, Texas, and plans to roll out services in seven additional U.S. cities in the first half of the year.
Margins under pressure despite growth areas
Net income in the fourth quarter plunged 61% to $840 million as operating expenses surged 39%, partly due to increased AI and research spending. Revenue from energy generation and storage rose 25%, while services revenue climbed 18% year over year.
Tesla also disclosed a $2 billion investment in Elon Musk’s AI startup xAI, aimed at strengthening its long-term artificial intelligence capabilities.
