Tesla delivered a mixed set of fourth-quarter results that once again captured the tension at the heart of the company, which has recorded a downward spiral of revenue in the past several quarters.
The EV giant’s latest earnings offered investors a familiar contradiction: short-term financial outperformance paired with deeper signs of strain in the company’s core business, even as Elon Musk presses ahead with a costly and uncertain pivot toward artificial intelligence, autonomy, and robotics.
Tesla reported better-than-expected fourth-quarter results after the bell on Wednesday, lifting its stock about 2% in extended trading. Adjusted earnings came in at 50 cents per share, ahead of the 45 cents expected by analysts surveyed by LSEG, while revenue of $24.90 billion narrowly topped forecasts. But the relief rally masked a more consequential development. Tesla’s full-year revenue fell 3% to $94.8 billion from $97.7 billion in 2024, marking the first annual revenue decline in the company’s history.
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That milestone underscores how sharply Tesla’s growth story has changed. Once defined by rapid expansion and soaring deliveries, the company is now grappling with slowing sales, intensifying competition, and a lineup that has aged as rivals push newer, cheaper models into the market. Nowhere is that pressure more visible than in China, where BYD and other domestic manufacturers have steadily eroded Tesla’s market share through aggressive pricing and frequent product refreshes.
In the fourth quarter alone, Tesla’s revenue slipped 3% from a year earlier, while automotive revenue fell a steeper 11% to $17.7 billion, down from $19.8 billion. Earlier this month, the company disclosed that vehicle deliveries plunged 16% in the quarter and declined 8.6% for the full year.
Although Tesla does not precisely define deliveries in its shareholder communications, the figure is widely treated as the closest proxy for sales, and the trend highlights the depth of the slowdown.
Management attributed the annual revenue decline partly to lower vehicle deliveries and reduced regulatory credit revenue, a reminder that Tesla has long relied on those credits to bolster earnings. The fading contribution from credits comes at a time when price cuts, used to defend market share, have already weighed on margins.
Profitability pressures were stark. Net income in the fourth quarter fell 61% to $840 million, or 24 cents per share, from $2.1 billion, or 60 cents per share, a year earlier. Operating expenses jumped 39%, driven largely by spending on artificial intelligence and other research and development projects. Those investments sit at the heart of Musk’s long-term vision, but they are also dragging on near-term earnings at a moment when revenue growth has stalled.
Tesla’s challenges in 2025 have not been purely commercial. Some of the downturn has been linked to Musk’s political posture, including his close work with President Donald Trump and a series of incendiary public statements and endorsements of far-right figures in Europe. That rhetoric triggered a consumer backlash in several markets, particularly among buyers who once associated Tesla with environmentalism and progressive values. The backlash persisted through the year, compounding the impact of competition and macroeconomic pressures.
During the earnings call, Musk acknowledged another structural issue: Tesla’s aging product lineup. He said the company would end production of the Model S and Model X vehicles first introduced in 2012 and 2015, respectively. While the move streamlines operations, it also highlights how heavily Tesla has leaned on incremental updates to a small number of models while competitors have cycled through new designs more rapidly.
Yet Musk made clear that he wants investors to focus less on cars and more on what he describes as Tesla’s future as an AI company.
“We’re really moving into a future that is based on autonomy,” he said, warning that the shift would require heavy capital spending.
Chief Financial Officer Vaibhav Taneja said Tesla expects about $20 billion in capital expenditures this year, spanning new factories, AI computing infrastructure, and the development of Optimus humanoid robots.
That strategic pivot is already reshaping Tesla’s operations. Musk said the Fremont, California, factory lines that once produced the Model S and X will be converted to manufacture Optimus robots. Tesla plans to unveil the third generation of Optimus later this quarter, describing it as its first design intended for mass production. The company has pitched Optimus as a bipedal, intelligent robot capable of tasks ranging from factory work to childcare, a vision that, if realized, would open markets far beyond automobiles.
Autonomy remains the other pillar of Tesla’s long-term bet. In 2025, the company launched a Robotaxi-branded ride-hailing app and began operating a pilot service in Austin, Texas. Last week, executives said they had removed human safety supervisors from a handful of vehicles in that fleet to conduct fully driverless passenger rides. Tesla said it plans to expand robotaxi coverage to seven additional U.S. cities in the first half of this year, including Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas.
The company has also begun tooling ahead of production of its Cybercab, a two-seat, purpose-built autonomous vehicle designed without a steering wheel or pedals. The Cybercab is intended to be the backbone of Tesla’s robotaxi ambitions, but regulatory approval and large-scale deployment remain unresolved. Musk has spent nearly a decade forecasting imminent breakthroughs in Full Self-Driving, and investors are increasingly pressing for firm timelines rather than aspirational targets.
While the automotive business struggles, other segments are providing some support. Revenue from Tesla’s energy generation and storage business rose 25% to $3.84 billion, driven by strong demand for grid-scale batteries used to stabilize power networks and support renewable energy. The services and other segments also grew, with revenue up 18% to $3.37 billion. Though smaller than the auto unit, these businesses offer diversification and exposure to longer-term infrastructure trends.
One of the most closely watched disclosures was Tesla’s confirmation that it agreed on Jan. 16 to invest about $2 billion in Musk’s artificial intelligence startup, xAI. The investment followed xAI’s recent $20 billion fundraising round, which exceeded its initial target and included Nvidia and Cisco as participants. Tesla said the deal, along with a broader partnership, is intended to enhance its ability to develop and deploy AI products and services “into the physical world at scale.”
The xAI investment is believed to strengthen Tesla’s autonomy and robotics roadmap by tightening integration with a dedicated AI research company. Also, it deepens concerns about capital allocation and governance, further entangling Tesla’s finances with Musk’s wider network of ventures at a time when its core business is under strain.
In essence, Tesla’s latest results capture a company at a crossroads. It highlights that the era of easy growth driven by electric vehicle adoption alone appears to be over. In its place, Musk is asking investors to accept slowing sales, declining profits, and rising spending in exchange for a future built on artificial intelligence, robotaxis, and humanoid robots.