Tesla, Inc. (TSLA) recently announced its fourth-quarter earnings, revealing adjusted earnings of 50 cents per share, surpassing analyst expectations of 45 cents. Revenue for the quarter reached $24.90 billion, exceeding the forecast of $24.79 billion. However, this positive news was overshadowed by a significant milestone: Tesla experienced its first annual revenue decline in history, with total annual revenue dropping 3% to $94.8 billion from $97.7 billion in 2024.
The results for the fourth quarter were not entirely positive, as net income plummeted 61% to $840 million, a stark contrast to the $2.1 billion recorded in the same period last year. This decline was attributed to a 39% increase in operating expenses, which Tesla linked to investments in artificial intelligence and research initiatives.
The automotive segment specifically showed signs of weakness, with Q4 auto revenue falling 11% from $19.8 billion to $17.7 billion year over year. Vehicle deliveries also declined, dropping 16% in the fourth quarter and 8.6% for the entire year. Increased competition from companies like BYD in China and other global manufacturers has intensified the pressure on Tesla.
During the earnings call, CEO Elon Musk announced plans to discontinue the production of the Model S and Model X, intending to repurpose factory lines for the development of Optimus humanoid robots. Musk emphasized Tesla”s shift towards autonomous technology, cautioning investors about elevated capital expenditures in the upcoming year. CFO Vaibhav Taneja projected approximately $20 billion in capital expenditures to support new factories, the Optimus project, and AI computing resources.
Tesla”s Robotaxi app, launched in 2025, is set to expand its service to seven additional U.S. cities by mid-2026, including Dallas, Houston, and Las Vegas. The company is also progressing with the development of its Cybercab, a two-seat vehicle designed for driverless operation.
Interestingly, not all segments faced declines; Tesla”s energy generation and storage revenue increased by 25% to $3.84 billion, while services and other revenue rose 18% to $3.37 billion. Additionally, Tesla committed roughly $2 billion to Elon Musk”s AI startup, xAI, as part of a broader funding round.
As Tesla navigates this critical period marked by revenue challenges and strategic pivots, the focus remains on its initiatives in automation and artificial intelligence, which may define its future trajectory in the electrification and tech spaces.
