Tesla’s latest results lay bare a company at a crossroads. For the full year 2025 the electric‑vehicle maker reported revenue of $94.827 billion, a 3% decline—the first annual revenue drop in its history—and net income slumped to $3.794 billion, down 46% from 2024. Fourth‑quarter net income attributable to ordinary shareholders was $840 million, a 61% year‑on‑year fall, even as investors cheered and the share price rose about 3% in after‑hours trading.
The immediate cause is a marked cooling of the core auto business. Global deliveries fell to 1,636,129 vehicles in 2025, down 8.6% year‑on‑year, with Q4 shipments of 418,227 down 16%. Automotive revenue likewise contracted—$17.693 billion in Q4 (down 11%) and $69.526 billion for the year (down 10%)—as price cuts, fading product momentum and intensifying competition eroded margins.
Several structural headwinds converged. Rival manufacturers, notably China’s BYD and legacy European groups, have closed the technology and cost gap and grabbed market share; BYD overtook Tesla as the global sales leader. In the United States, Tesla’s sales were hit by the expiry of a $7,500 federal EV tax credit in September 2025 and by the reputational drag of high‑profile controversies around its founder, weakening demand among some buyer segments.
At the same time Tesla is investing heavily to reinvent itself. Operating expenses jumped 23% to $12.739 billion for the year as R&D and future‑facing projects swallowed cash. Barclays estimates Tesla’s pretax margin slipped to roughly 6% in 2025—well below the peaks the company once enjoyed and below many established automakers today.
Yet the report was not uniformly bleak. Energy generation and storage emerged as the company’s fastest‑growing division: energy revenue rose 27% in 2025 to $12.771 billion, with Q4 revenue at $3.837 billion (up 25%). Deployments of energy storage reached a record 14.2 GWh in the quarter, an increase of about 29%, and Powerwall installations now number more than one million globally, enabling a nascent virtual power‑plant business that has already responded to tens of thousands of grid events.
Cashing in on that future narrative, Tesla announced a roughly $2 billion investment in xAI, Elon Musk’s AI startup, days before the earnings release. Tesla’s stated rationale is to accelerate “real‑world” AI deployments across its products. The market greeted the move positively because investors appear willing to price Tesla not as a carmaker but as a platform company that could monetise robotaxis, humanoid robots and systems‑level AI.
Those ambitions are bold but precarious. Musk’s Robotaxi vision and the Optimus humanoid robot remain largely developmental. Tesla has started limited driverless passenger tests without safety operators in Austin and plans to expand to other cities in 2026, with production of a dedicated Cybercab slated for April 2026. Optimus Gen‑3 is due to be shown in Q1 and a production line targeted for late 2026, but Tesla cautioned early volumes will be “extremely slow.” If commercialisation and regulatory approval for fully autonomous fleets and humanoid robots lag, today’s valuation premia could be at risk.
For global markets and policymakers the shift matters because Tesla has been a bellwether for the EV transition and for supply‑chain dynamics. A structurally weaker Tesla would alter pricing pressure across the industry, affect battery demand patterns and reshape where innovation capital flows. Conversely, a successful pivot toward energy services and physical AI would create new markets for grid flexibility and robotics, with implications for utilities, labor markets and geopolitical competition in technology supply chains.