Tesla: Weak Quarter, Focus on the Future
Key Points
Tesla's quarterly results were down year over year but still came in at or just above Wall Street expectations.
The company saw momentum slow in key product areas in Q2 but is rapidly expanding its addressable market by adding robotics and AI.
Tesla said its new, more-affordable vehicle remains on track to go into production before the year’s end and said the Semi and Cybercab are coming in 2026.
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Here's our initial take on Tesla's (NASDAQ: 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
Tesla's quarter came in largely as expected, with revenue and earnings per share down 12% and 23%, respectively, and coming in at or just above analyst expectations. The company attributed the revenue decline to a decrease in deliveries and lower regulatory credit revenue, coupled with a reduction in average selling price.
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Energy generation and storage revenue also fell due to lower pricing.
But the company remains upbeat about its future. Tesla is still primarily an automaker, generating 74% of revenue this quarter from automotive sales. But the focus this quarter was on what is to come, with the company, in its release, calling the just-finished second quarter "a seminal point" in Tesla's history. "The beginning of our transition from leading the electric vehicle and renewable energy industries to also becoming a leader in AI, robotics, and related services," the report noted.
The company said it remains on track to expand its vehicle offering, including ramped-up production volumes for a new more affordable model planned for the second half of this year. The company also expects to start volume production of the Semi model and its autonomous Cybercab -- a specially designed vehicle for autonomous rideshare -- in 2026.
Immediate Market Reaction
Investors came into Tesla earnings with low expectations, with the stock down 17% year to date. So perhaps it is no surprise that the initial reaction was a muted one, with Tesla shares down 1.5% in after-market trading on Wednesday following the release but ahead of the postearnings call.
What to Watch
Tesla has always been valued more on what is to come than on the present results. But rarely in recent history has there been so little momentum in the core business, and with tax law changes coming, the automotive regulatory credits that have been a key driver of profitability are soon to disappear.
With that in mind, expect investors to pay particular attention to CEO Elon Musk's vision for what is to come, and specifics about the timeline for when new products will actually be available for purchase. The initial Robotaxi service launch in Austin, Texas, using standard Tesla models is progressing, and investors will be keen to hear details about future plans.
If all goes to plan, a rollout of a new, more affordable vehicle model could spur revenue growth in the quarters to come, and the company's continued advancements in robotics, autonomous driving, and energy should create new pillars for growth.
Helpful Resources
- Full earnings report
- Investor relations page
- Additional coverage
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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