Tesla: slowing growth, falling profits, and a bet on the future

Tesla is entering a challenging phase, and once again, Elon Musk faces the task of proving his managerial capabilities, steering the company through a looming crisis, and advancing it to the next stage of technological evolution.

Tesla, Inc. (NASDAQ: TSLA) reported revenue of 22.5 billion USD for Q2 of fiscal year 2025 – a 12% year-on-year decline – and net profit of 1.17 billion USD, down 16%, mainly due to a reduction in regulatory credits and lower vehicle deliveries. While revenue slightly exceeded forecasts, and earnings per share met expectations at 0.40 USD, income from regulatory credits was nearly halved, falling to 439 million USD, which placed significant pressure on the company’s bottom line. CEO Elon Musk stated that Tesla is entering a transition period and warned of several difficult quarters ahead, citing reduced government support for electric vehicles in the US and increasing tariff barriers. Among its achievements, the company highlighted the expansion of its robotaxi pilot programme in Austin, progress on a more affordable vehicle scheduled for launch in late 2025, and ongoing investment in energy and AI.

Following the earnings release, Tesla shares fell by 8.1% as investors reacted negatively to short-term risks, despite the company’s long-term potential in autonomy and energy.

This article examines Tesla’s business model, its core revenue streams, and the high-growth segments that could significantly boost future earnings. It also outlines the key risks associated with investing in TSLA shares. The analysis draws on financial results from Q3 and Q4 2024, as well as Q1 and Q2 2025, enabling a comparison across reporting periods. It concludes with a technical analysis of TSLA’s shares, which forms the basis for Tesla’s 2025 forecast.

About Tesla, Inc.

Tesla was founded in 2003 by Martin Eberhard and Marc Tarpenning. In 2004, Elon Musk joined the co-founders and became the largest investor, assuming the role of Chairman of the Board. In 2008, Musk became the CEO of the company.

Initially, Tesla focused exclusively on electric vehicle production, but new business areas eventually emerged. The first electric car, the Tesla Roadster, was introduced in 2008, marking the beginning of the electric vehicle manufacturing era. In 2014, the company introduced a driver assistance system, which later evolved into a fully autonomous driving system, known as Full Self-Driving.

In 2016, Tesla acquired SolarCity, a company specialising in solar panel installation, leading to the creation of Tesla Energy – a division focused on manufacturing solar panels and energy storage devices. In the near future, the company plans to launch a robotaxi service using autonomous vehicles for passenger transport, enter the freight market with the electric Tesla Semi truck, complete the development of the Optimus humanoid robot, and build the world’s most extensive Artificial Intelligence (AI) cluster for the Dojo supercomputer.

Tesla, Inc.’s main revenue streams

Tesla, Inc. generates revenue from various sources, reflecting the diversity of its products and services. The main revenue streams include:

• Vehicle sales: covers both direct sales to consumers and leasing
• Regulatory credits: regulatory credits sold to other automakers that need them to comply with environmental regulations
• Energy generation and storage: manufacturing and selling solar energy systems and energy storage devices – Powerwall (for residential use), Powerpack (for commercial applications), and Megapack (for large-scale energy needs)
• Services and other revenues: maintenance and repair centres, the Supercharger network, and insurance services for Tesla vehicle owners
• Software and autonomous driving: fees for advanced driver assistance systems (Autopilot), the Full Self-Driving (FSD) package, and software updates
• Battery and powertrain sales: supplying other companies with electric batteries, power units, and drivetrains
• Renewable energy projects: contracts with utility companies and large energy consumers for the deployment of Tesla’s energy storage solutions

Tesla, Inc. Q3 2024 financial results

Tesla released its Q3 2024 earnings report on 23 October, highlighting the following key figures:

• Total revenue: 25.18 billion USD (+8%)
• Net profit: 2.17 billion USD (+17%)
• Earnings per share (EPS): 0.62 USD (+17%)
• Operating margin: 10.8% (+323 basis points)
• Capital expenditures: 3.51 billion USD (+43%)

Revenue breakdown by segment:

• Vehicle sales: 20.02 billion USD (+2%)
• Energy generation and storage: 2.38 billion USD (+52%)
• Services and other revenue: 2.79 billion USD (+29%)

In its commentary on the report, Tesla’s management noted that, despite revenue falling short of Wall Street’s consensus estimate (25.18 billion USD vs. 25.47 billion USD), the company beat profit forecasts, reporting EPS of 0.72 USD compared with the expected 0.60 USD. This was achieved through higher gross margins, supported by reduced per-unit production costs. Tesla delivered a record 462,890 electric vehicles in Q3 2024, its highest quarterly total to date.

Tesla plans to introduce more affordable vehicle models in H1 2025, expecting sales growth of 20-30% for the year. Mass production of the Cybercab is scheduled for 2026, with a target output of at least two million units. Additionally, Tesla announced that its 4680-battery cell technology is approaching cost competitiveness, which could significantly shift the economics of battery production.

Management expressed confidence in the company’s strategic initiatives and its leading position in both the automotive and energy sectors.

Tesla, Inc. Q4 2024 financial results

On 29 January, Tesla released its Q4 2024 earnings report, showing a 71% decline in net profit. The key figures from the report are as follows:

• Total revenue: 25.70 billion USD (+2%)
• Net profit: 2.12 billion USD (-71%)
• Earnings per share (EPS): 0.60 USD (-71%)
• Operating margin: 6.2% (-204 basis points)
• Capital expenditures: 2.78 billion USD (+21%)

Revenue breakdown by segment:

• Vehicle sales: 19.80 billion USD (-8%)
• Energy generation and storage: 3.06 billion USD (+113%)
• Services and other revenue: 2.84 billion USD (+31%)

Tesla set a new record for electric vehicle deliveries in Q4 2024, with 495,570 units sold. The Tesla Model Y was the best-selling car worldwide in 2024. Elon Musk highlighted the successful production ramp-up at the Berlin and Texas Gigafactories, which played a key role in achieving these figures.

Tesla’s energy storage business also showed significant growth, driven by increased demand for products like Megapack and Powerwall. Musk emphasised that this segment is essential to Tesla’s automotive business.

The Full Self-Driving (FSD) technology continues to evolve, with the Beta program now available to more users, helping collect valuable data. Musk expressed confidence that Tesla will achieve full vehicle autonomy soon. Looking ahead, the company aims to increase vehicle deliveries by approximately 50% year-on-year while expanding its model lineup and boosting production capacity at existing factories. Tesla also focuses on cost reduction and improving operational efficiency.

A notable remark from Elon Musk concerned the Optimus robots. He stated that by the end of 2025, several thousand Optimus units will be capable of performing practical tasks, initially tested and deployed at Tesla’s factories. Musk outlined Tesla’s ambition to rapidly scale Optimus production, projecting that even with a 50% annual growth rate, production could reach 100 million units per year within a few years. He underscored the importance of robotics and AI for Tesla’s future, seeing them as part of the company’s strategy to lead not only in electric vehicles but also in AI and robotics – a vision that could make Tesla the most valuable company in the world.

Tesla, Inc. Q1 2025 financial results

On 22 April, Tesla released a weaker-than-expected Q1 2025 report. Its highlights are outlined below:

• Total revenue: 19.34 billion USD (-9%)
• Net income: 0.93 billion USD (-39%)
• Earnings per share: 0.27 USD (-40%)
• Operating margin: 2.1% (-343 basis points)
• Operating expenses: 2.75 billion USD (+9%)
• Capital expenditures: 1.49 billion USD (-46%)

Revenue by segment:

• Vehicle sales: 13.97 billion USD (-20%)
• Energy generation and storage: 2.73 billion USD (+67%)
• Services and other revenue: 2.63 billion USD (+15%)

Tesla’s Q1 2025 report reflected a challenging period for the company. Financial performance was lower than expected, with EPS (non-GAAP) at 0.27 USD, below the forecast of 0.42 USD. The automotive segment, the company’s primary revenue source, contracted by 20%, driven by a 13% decline in deliveries and lower average selling prices. These results highlight the impact of the temporary suspension of Model Y production, an aggressive pricing policy, and a reliance on regulatory credit revenues (595 million USD), without which the automotive division would have posted a loss. Macroeconomic factors, uncertainty surrounding trade policy, and reputational risks associated with Elon Musk’s public activity further complicated the company’s position.

Nevertheless, Tesla’s energy business showed an impressive 67% increase in revenue, reaching 2.73 billion USD and delivering a record gross profit, confirming the company’s success in the energy storage segment. Free cash flow turned positive, reaching 664 million USD compared with a deficit of 2.53 billion USD a year earlier, indicating effective capital management despite significant AI investments.

The strategic focus on autonomous technology remains the company’s key growth driver. The launch of Full Self-Driving (FSD) as a paid service was planned for June, with millions of autonomous vehicles projected to be deployed by the end of 2025.

The Optimus humanoid robot project, with a target production of one million units per year by 2029, underscored Tesla’s ambition to expand beyond the automotive sector.

The market reacted positively to the report, with the stock gaining over 7% following the release, reflecting confidence in these initiatives, particularly in light of Musk’s statements about prioritising Tesla. However, short-term risks remain considerable. The withdrawal of the growth forecast for deliveries in 2025 signalled demand uncertainty, exacerbated by potential tariffs and competition from Chinese manufacturers such as BYD. A 9% increase in operating expenses and the lack of clarity regarding the launch of more affordable models heightened this uncertainty.

Tesla’s management provided no specific forecasts for Q2 2025, stating instead that they would revise the 2025 outlook after the Q2 2025 results, citing ongoing uncertainty in the automotive and energy markets amid shifting trade policies and macroeconomic conditions. Analysts forecast Q2 2025 revenue of around 24.45 billion USD, although Tesla has not confirmed or revised this figure.

Given these factors, Tesla remains a highly risky investment. The energy segment, AI development, and long-term strategic vision offer the potential for substantial growth. However, delivering on these ambitions will require Elon Musk to return to active management of the company, as he promised. His involvement in US politics negatively affected Tesla’s reputation, and the company now faces the challenge of restoring trust among both consumers and investors.

Tesla, Inc. Q2 2025 financial results

Tesla released its Q2 2025 earnings report on 23 July. The key figures compared with the same period in 2024 are as follows:

• Total revenue: 22.49 billion USD (-12%)
• Net income: 1.39 billion USD (-23%)
• Earnings per share: 0.40 USD (-23%)
• Operating margin: 4.1% (-220 basis points)
• Operating expenses: 2.95 billion USD (-1%)
• Capital expenditures: 2.39 billion USD (+5%)

Revenue by segment:

• Automotive sales: 16.66 billion USD (-16%)
• Energy generation and storage: 2.78 billion USD (-7%)
• Services and other revenue: 3.04 billion USD (+17%)

Tesla’s Q2 2025 results were disappointing, with revenue down 12% year-on-year to 22.5 billion USD, and net income falling to 1.39 billion USD – the company’s weakest quarterly performance in a decade. The primary factor behind the decline was a 17% decrease in automotive sales revenue, totalling 16.66 billion USD. Operating profit dropped by 42%, while free cash flow totalled just 146 million USD. Overall liquidity also declined, reaching 36.8 billion USD at the end of the quarter. Tesla delivered 384,122 vehicles during the period, representing a 14% year-on-year decrease.

These results underscored the serious challenges faced by Tesla, including slowing global demand for electric vehicles, intensifying competition (particularly from Chinese manufacturers), aggressive price reductions, and the withdrawal of US subsidies – all of which have weighed on margins and profitability. Notably, around 37% of Tesla’s quarterly profit came from the sale of regulatory credits (439 million USD). If these are fully phased out under new US policies, Tesla’s profit margin will come under further pressure. Additional obstacles include trade barriers and criticism surrounding Elon Musk’s political activity, which has reportedly dented demand in Europe.

Despite this, Tesla retains several potential growth drivers. These include the launch of a fully autonomous robotaxi, which could introduce a subscription-based model and enable the scaling of a robotaxi fleet, and a planned affordable electric vehicle priced at approximately 25,000 USD, which could significantly widen its customer base. Growth is also expected in the energy storage and robotics divisions.

For Q3 2025, Tesla did not provide formal guidance for key indicators. Elon Musk warned of challenging upcoming quarters due to macroeconomic factors, the end of US incentives, new tariffs on Chinese-made components, and regulatory ambiguity surrounding self-driving systems. The company’s CFO also stated that production of the latest affordable model would proceed gradually. Wall Street analysts forecast Q3 revenue at around 22.2 billion USD, with EPS potentially declining to 0.39 USD, 25% below last year’s result.

Investor response to the quarterly report was negative – Tesla shares fell by more than 8% following the release. Analyst sentiment was mixed: some experts maintained a Buy recommendation with a price target of 500 USD, while others took a more conservative stance, recommending Sell with a target around 115 USD. A few of the most pessimistic analysts even forecast a collapse of the company, citing a target of 19 USD per share. Based on the P/E ratio, Tesla remains significantly overvalued compared with the sector average, making predictions of a decline in TSLA’s share price appear justified. However, it should be noted that a high P/E can also reflect expectations of strong growth – in Tesla’s case, this may be warranted by its technological leadership and scalable developments in autonomous driving, AI, and energy.

Tesla is currently undergoing a strategic transition. Profitability and revenue may continue to fluctuate in the coming quarters, but if the company successfully executes its roadmap, it could restore growth momentum. Investing in Tesla at this stage is a long-term wager on its capabilities in autonomy, artificial intelligence, and energy. Those less comfortable with high risk may prefer to wait until performance stabilises and new product demand is confirmed.

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Promising business areas for Tesla, Inc.

Below are the promising business areas that Elon Musk is developing, which could prove successful:

• Robotaxi: Tesla’s Robotaxi project (Cybercab) is currently undergoing testing in Austin, Texas, where, since June 2025, approximately 10–20 Model Y vehicles have been transporting passengers without a driver, but with a safety operator on board. The service is by invitation only, priced at 4.20 USD per ride, and operates within the South Congress area. Elon Musk plans to scale the service in 2026, including the launch of the Cybercab – a two-seater vehicle without a steering wheel. In the future, Tesla owners will be able to lease their cars for use in the robotaxi network
• Tesla Semi truck: this electric lorry is designed to replace traditional diesel trucks on the roads. Unveiled in November 2017, it features advanced driver assistance systems, including Autopilot. The monetisation of the Tesla Semi project includes direct sales, servicing, maintenance, and charging infrastructure
• Full Self-Driving (FSD) project: this fully autonomous driving system is offered to Tesla EV owners as a paid upgrade. The project has multiple monetisation avenues. Once perfected and approved by regulatory bodies, Tesla could sell FSD software to other car manufacturers, later generating revenue from updates and technical support services
• Tesla Optimus humanoid robot: on 19 August 2021, during the Tesla AI Day event, Tesla Bot, also known as Optimus, was unveiled to the public. This robot is designed to perform a variety of tasks in both industrial and household settings. Monetisation of the project is planned through the sale of the robots, rental and subscription services, as well as the sale of maintenance and spare parts. Limited production for Tesla’s factories began in 2025, with a wider release to other companies planned for 2026
• Tesla Dojo supercomputer: Tesla is developing a large-scale AI cluster for the Dojo supercomputer, designed to process massive datasets for machine learning models. Monetisation will come from leasing computing power and developing new AI-driven products and services
• Energy business: Tesla is actively expanding its energy division, which includes the production and sale of solar energy panels, energy storage systems, and energy services. The company will generate revenue through equipment sales, installation, maintenance, and energy service contracts

Expert forecasts for Tesla, Inc. shares for 2025

• Barchart: 12 of 40 analysts rated Tesla shares as a Strong Buy, two as Buy, 16 as Hold, and 10 as Strong Sell. The highest price target is 500 USD, and the lowest is 115 USD
• MarketBeat: 18 out of 40 specialists rated the shares as Buy, 13 recommended Hold, and nine Sell. The highest price target is 500 USD, and the lowest is 19 USD
• TipRanks: 14 of 33 professionals recommended Buy, 13 Hold, and seven Sell. The highest price target is 500 USD, and the lowest is 19 USD
• Stock Analysis: six out of 34 experts rated the shares as Strong Buy, eight as Buy, 13 as Hold, four as Sell, and three as Strong Sell. The highest price target is 500 USD, and the lowest is 19 USD

Tesla, Inc. stock price forecast for 2025

Elon Musk actively supported Donald Trump during the US presidential race, and following Trump’s victory, Tesla shares began to rise. From 4 November to 16 December, TSLA’s share price doubled, reaching an all-time high of 489 USD. However, Musk’s subsequent involvement with DOGE negatively affected Tesla. In addition to strong competition and trade tensions, there was growing backlash on social media and among progressive audiences calling for a boycott of Tesla vehicles. Against this backdrop, TSLA’s share price declined by 56%, returning to levels last seen in early November 2024.

Musk’s return to active leadership of the company reignited investor optimism, with Tesla shares rising by 67% between April and May 2025. However, Musk once again found himself at the centre of political controversy – this time clashing with the Trump administration. This led to a public dispute on social media and, subsequently, to the administration’s decision to cut subsidies for electric vehicles in the US. Given that around 37% of Tesla’s Q2 2025 profit came from the sale of regulatory credits, this could significantly affect the company’s financial performance. As a result, investor caution remains, reflected in TSLA’s consolidation within the 290–370 USD range. Based on the current performance of Tesla shares, the possible price scenarios for 2025 are as follows:

The optimistic forecast for Tesla stock anticipates a test of the 290 USD support level, followed by a rebound and a rise to the resistance at 370 USD. Should this level be breached, the next target would be the historical high of 489 USD. Elon Musk is a talented executive with a track record of overcoming crises and transforming businesses. A bet on Tesla shares is, in essence, a belief that Musk will once again find a way forward and take the company to new heights.

The alternative forecast for Tesla shares assumes a break below the 290 USD support level. In this case, negative sentiment among investors may intensify, and in the most adverse scenario, TSLA’s share price could decline to 160 USD.

Risks of investing in Tesla, Inc. shares

Considering the factors that could negatively impact the company’s future earnings is crucial when investing in Tesla, Inc. shares. Below are the main risks:

• Increased competition: Tesla faces growing competition from both traditional automakers, such as Volkswagen, General Motors, and Ford, as well as newer players, including BYD, Rivian, and Lucid. The competition is particularly fierce in China, where BYD has already surpassed Tesla in total electric vehicle production, including hybrid vehicles. Increased competition could lead to a loss of market share and price wars, reducing Tesla’s profitability
• Economic conditions: elevated interest rates and economic downturns can impact consumer spending on expensive goods, such as electric vehicles. If interest rates remain high or increase further, the cost of financing a new Tesla could deter potential buyers
• Policy changes: changes in government policy, such as the cancellation or reduction of tax incentives for electric vehicles, could affect demand for Tesla cars. State-level policies, such as a potential new credit system in California, where Tesla may not meet the criteria, could also further impact sales
• Manufacturing and supply chain issues: delays or inefficiencies in ramping up production of new models could prevent Tesla from meeting market demand. Supply chain disruptions, chip shortages, or factory shutdowns could also affect production capabilities
• Technological challenges: if Tesla’s advancements in autonomous driving or battery technology fail to meet expectations, or if competitors outpace Tesla in these areas, it could result in a loss of competitive advantage and investor confidence
• Global Market Dynamics: fluctuations in exchange rates, trade tensions (especially with China, where Tesla has significant sales and production), or new tariffs could impact Tesla’s international revenues

These factors, in combination, could influence Tesla’s revenue trajectory in 2025, creating a challenging environment where the company will need to navigate both internal and external challenges to maintain or improve its market position.