Tesla: Weak Quarter, Focus on the Future

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Here’s our initial take on Tesla‘s (TSLA) fiscal 2025 second-quarter financial report.

Key Metrics

Metric Q2 2024 Q2 2025 Change vs. Expectations
Revenue $25.5 billion $22.5 billion -12% Beat
Adjusted EPS $0.52 $0.40 -23% Met
Energy generation and storage revenue $3.0 billion $2.8 billion -7% n/a
Gross margin 18% 17.2% 80 bp n/a

Tesla Looks Toward the Next Big Thing

In simpler terms, Tesla’s quarterly results were mostly in line with predictions, showing a 12% drop in overall revenue and a 23% decrease in earnings per share. These figures were slightly higher than what analysts anticipated. The company explained that the decline in revenue was due to a decrease in vehicle deliveries, lower income from regulatory credits, and a reduction in the average price at which vehicles were sold.

Energy generation and storage revenue also fell due to lower pricing.

Despite the current positive outlook, it’s important to remember that Tesla is predominantly an automobile manufacturer, earning 74% of its quarterly income from auto sales. However, this quarter saw a shift towards anticipation for future developments. In its statement, Tesla referred to the recently concluded second quarter as a significant milestone in its journey. The company emphasized that it’s not only aiming to lead in electric vehicles and renewable energy sectors but also intends to excel in artificial intelligence, robotics, and related services, marking the start of this transition.

The firm indicated that it’s steadily progressing towards expanding its automotive lineup, with increased manufacturing output for a cost-effective model slated for the latter part of this year. Additionally, they anticipate initiating mass production of their Semi truck and autonomous Cybercab, an innovative vehicle designed for ride-sharing services, in 2026.

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Immediate Market Reaction

Initial investor anticipations for Tesla’s earnings were relatively low, given that the stock had already dropped by 17% throughout the year. Consequently, it is not surprising that the initial response was subdued, with Tesla shares decreasing by 1.5% in after-hours trading on Wednesday immediately after the earnings release but before the post-earnings call.

What to Watch

Historically, Tesla has often been appreciated more for its future prospects rather than current performances. However, it’s unusual nowadays to find such minimal progress in their primary operations. With impending changes in tax laws, the automotive regulatory credits that have significantly contributed to their profitability are expected to diminish soon.

Keeping that thought in mind, investors are likely to focus closely on Elon Musk’s forward-looking perspective and the specifics regarding when new products can be expected to hit the market for purchase. The ongoing rollout of Robotaxi service in Austin, Texas, utilizing standard Tesla vehicles has been noted, and it’s certain that investors will eagerly await updates on future plans.

If everything proceeds smoothly, introducing an economical new car model might boost our earnings in the upcoming quarters. Additionally, our ongoing progress in robotics, self-driving technology, and energy solutions could establish fresh foundations for future expansion.

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2025-07-24 00:39