Tesla Q4 2025 Earnings: Profits Fell 61% But Wall Street Focuses On What Comes Next

Tesla beat Wall Street expectations on earnings and margins in Q4 2025, even as net income dropped 61% and annual profit fell to less than a third of its 2022 peak. Investors shrugged off the decline and pushed shares higher after hours, betting on CEO Elon Musk’s promises of robotaxis, humanoid robots, and a $20 billion spending spree in 2026.

• The numbers: Q4 revenue hit $24.9 billion (slightly below the $25.11 billion estimate), but adjusted EPS of $0.50 beat the $0.45 consensus. Gross margin of 20.1% crushed the 17.1% forecast.
• The decline: GAAP net income fell to $840 million, down from $2.1 billion a year earlier. Full-year net profit dropped 46% to $3.8 billion.
• The bet: Tesla plans to spend $20 billion on capital expenditures in 2026, more than double what it spent last year, focused on AI infrastructure and robotaxi expansion.

Earnings Beat Expectations Despite Falling Revenue

Tesla reported adjusted earnings per share of $0.50 for Q4 2025, topping the $0.45 analyst consensus. Operating income reached $1.41 billion against estimates of $1.32 billion. The gross margin surprise was the biggest: 20.1% vs. the 17.1% Wall Street expected, suggesting Tesla’s cost-cutting efforts are working even as vehicle prices continue to drop.

Revenue came in at $24.9 billion, missing the $25.11 billion estimate by about 1%. That 2.4% year-over-year decline reflects Tesla’s core problem: it’s selling fewer cars at lower prices. Growing energy storage revenue helped offset some of the automotive decline, but not enough to prevent the miss.

Tesla shares closed at $431.46 on January 28 and rose over 3% in extended trading before pulling back slightly.

Full-Year Profits Collapsed To A Fraction Of Tesla’s Peak

The full picture is starker. Tesla’s annual net profit fell to $3.8 billion, down from $7.1 billion in 2024. That 46% decline marks the second consecutive year of falling profits. Tesla’s annual income is now just 30% of the $12.6 billion it earned in 2022, its peak year.

Earnings have fallen in nine of the last 10 quarters, according to CNN. Revenue for the year slipped 3% to $94.8 billion. The pretax profit margin has dropped to roughly 6%, less than half of Toyota’s, according to Barclays analysts.

Tesla delivered 1.64 million vehicles globally in 2025, an 8% drop from 2024’s nearly 1.8 million. Q4 deliveries hit 418,227, down 15% from 495,570 a year earlier. It was the second straight year of annual sales declines for a company that once grew at nearly 50% per year.

BYD Took Tesla’s Crown As The World’s Largest EV Maker

The competitive picture has shifted. Chinese automaker BYD sold more than 2.25 million battery-powered vehicles in 2025, claiming the title of world’s largest EV manufacturer. In Europe, Volkswagen now outsells Tesla on electric vehicles. Chinese competitors Geely and SAIC grew their electrified vehicle sales by 90% and 33% respectively, though those figures include plug-in hybrids alongside pure battery-electric models.

Multiple headwinds hit Tesla at once. The elimination of the $7,500 US federal EV tax credit at the end of September 2025 dragged down Q4 sales. Competition from legacy automakers intensified, with several brands launching EVs that charge faster and travel farther than Tesla’s most popular models. And Musk’s polarizing political activities continued to hurt the brand.

Consumer polling paints a grim picture for Tesla’s reputation. A survey of 3,000 US consumers found only 27% have a positive view of Tesla while 37% view it negatively. Among existing Tesla owners who bought another EV, brand loyalty dropped from 98% in 2020 to 78% in 2025. Only 14% of respondents said Tesla’s Full Self-Driving software made them more likely to buy the brand. 34% said it made them less likely.

Tesla Is Spending $20 Billion To Become A “Physical AI Company”

Musk spent much of the earnings call looking forward rather than addressing the decline. Tesla plans to spend $20 billion on capital expenditures in 2026, more than double its 2025 spending, on what Musk called “big investments for an epic future.”

The spending covers several major initiatives:

• Cybercab: Production of the two-seat autonomous vehicle with no steering wheel or pedals starts in the first half of 2026. Musk predicted sales would eventually exceed “several times more” than all other Tesla vehicles combined.
• Robotaxi expansion: Tesla will expand its ride-hailing service to Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas in H1 2026. The company has begun removing safety monitors from some rides in Austin. Musk reiterated a goal of 25-50% of the US having access to fully autonomous vehicles by year-end, “pending regulatory approval.”
• Optimus robots: Tesla will unveil Optimus V3 in Q1 2026, with production starting before year-end and eventual planned capacity of one million robots per year. The Model S and Model X production lines at Fremont will be converted to robot manufacturing. – Tesla Semi: Production ramp begins in the first half of 2026.
• Next-gen Roadster: Production is planned alongside six new production lines across all products.

Tesla also disclosed a $2 billion investment in preferred shares of xAI, Musk’s AI company that owns the X social media platform. “We’re just doing what shareholders asked us to do, pretty much,” Musk said of the deal, which raises conflict-of-interest questions given his stakes in both companies.

FSD Subscriptions Doubled But Consumer Skepticism Remains

Tesla’s Full Self-Driving software reached 1.1 million subscribers by the end of 2025, doubling from the prior year. The company is pursuing regulatory approval for FSD in China and Europe.

But Tesla remains well behind Waymo in the actual robotaxi business. Alphabet’s Waymo offers fully driverless service in six US cities and has logged more commercial autonomous miles than Tesla. Tesla’s Austin-based service only recently began limited rides without safety monitors.

Musk acknowledged his history of overly optimistic timelines, telling investors that autonomous driving would eventually dominate: “The vast majority of miles traveled will be autonomous in the future. I’m just guessing, but probably less than 5% of miles driven will be where somebody is actually driving the car themselves.”

EVXL’s Take

The disconnect between Tesla’s financials and its stock price has never been wider. A company with collapsing profits, falling deliveries, and a shrinking brand reputation trades at nearly 300 times trailing earnings. The entire valuation rests on one assumption: that Musk delivers on autonomy and robotics.

The Q4 margin beat is genuinely encouraging. Getting gross margins back above 20% while competitors pile in shows Tesla still has manufacturing discipline. But revenue missed, profits are a shadow of 2022, and BYD just lapped them on volume. These are not the numbers of a company in control of its market.

The $20 billion capex bet is the real story here. Tesla is going all-in on a future where cars are a sideshow to robots and robotaxis. If Musk delivers even half of what he promised on this call, the stock looks cheap. If he doesn’t, and he has a long track record of missing timelines, shareholders are sitting on the most expensive “trust me” in market history.

Watch two things over the next six months: whether Cybercab production actually starts on schedule in H1 2026, and whether the robotaxi service expands to those seven new cities without major safety incidents. Those are the proof points that will determine if Tesla’s transformation story holds or if the market finally demands results over promises.

Editorial Note: This article was researched and drafted with the assistance of AI to ensure technical accuracy and archive retrieval. All insights, industry analysis, and perspectives were provided exclusively by Haye Kesteloo and our other EVXL authors, editors, and YouTube partners to ensure the “Human-First” perspective our readers expect.