Tesla's Q2 performance is bleak, marking the largest sales decline in a decade. The company reaffirms its plans for new vehicle launches and the mass production of Cybercab, with guidance absent | Earnings Report Insights

In the recently concluded second quarter, Tesla's sales revenue and profits fell significantly below expectations across the board, with the revenue from its main business, automotive, continuing to decline in double digits. The energy business, which is more affected by tariffs than automotive, saw its revenue shift from growth to decline.

Tesla reiterated its plan to launch new vehicles this year, including low-priced cars, and still expects the exclusive product for its autonomous taxi Robotaxi, Cybercab, to begin mass production next year. It also mentioned that the Semi truck is planned for mass production next year, but the financial report did not disclose the performance guidance that was forecasted when the first quarter report was announced.

After the financial report was released, Tesla's stock price, which rose over 0.1% on Wednesday, accelerated its increase in after-hours trading, with gains approaching 2%, before retreating and turning negative.

Tesla executives mentioned during the earnings call that the Trump administration's repeal of the electric vehicle tax credit and spending bill, as well as tariff policies, would hurt demand for electric vehicles. They expect tariffs to cost the company about $300 million and stated that they would increase sales efforts before the expiration of the vehicle tax credit policy, delaying the launch of new products.

Tesla CEO Elon Musk also warned during the call that Tesla is in an "unusual transition period." The company may face "several challenging quarters" due to the loss of incentives for electric vehicle sales in the U.S.

Tesla's stock price fell further in after-hours trading, with the decline exceeding 4% at one point during Musk's remarks.

On July 23rd, Eastern Time, Tesla announced its financial performance for the second quarter of 2025 after U.S. stock market hours.

1) Key Financial Data

Revenue: In the second quarter, Tesla's operating revenue was $22.5 billion, a year-on-year decrease of 12%, while analysts expected $22.64 billion, with a 9% year-on-year decline in the first quarter.

EPS: The adjusted non-GAAP earnings per share (EPS) for the second quarter was $0.40, a year-on-year decrease of 23%, while analysts expected $0.42, with a 40% year-on-year decline in the first quarter.

Operating Profit: The operating profit for the second quarter was $923 million, a year-on-year decrease of 42%, while analysts expected $1.23 billion, with a 66% year-on-year decline in the first quarter.

Net Profit: The adjusted net profit for the second quarter was $1.393 billion, a year-on-year decrease of 23%, with a 39% year-on-year decline in the first quarter.

Profit Margin: The operating profit margin for the second quarter was 4.1%, compared to 2.1% in the first quarter and 6.3% a year ago; the gross profit margin for the second quarter was 17.2%, a year-on-year decrease of 71 basis points, compared to 16.3% in the first quarter, while analysts expected 16.5%.

Capital Expenditure: The capital expenditure for the second quarter was $2.394 billion, a year-on-year increase of 5%, while analysts expected $2.43 billion, with a 46% year-on-year decline in the first quarter.

Free Cash Flow: The free cash flow for the second quarter was $146 million, a year-on-year decrease of 89%, while analysts expected $760 million, with a 126% year-on-year increase in the first quarter2) Segmented Business Data

Automotive: In the second quarter, automotive revenue was $16.661 billion, a year-on-year decrease of 16%, compared to a 20% year-on-year decrease in the first quarter. The gross margin for the automotive business, excluding regulatory credit points, was 15%, compared to 12.5% in the first quarter.

Energy Storage: In the second quarter, revenue from energy production and storage was $2.789 billion, a year-on-year decrease of 7%, compared to a year-on-year increase of 67% in the first quarter.

Revenue and Profit in the Second Quarter Both Exceeded Expectations for Decline, "Carbon Selling" Revenue Has Decreased for Four Consecutive Quarters

The financial report shows that Tesla's revenue accelerated its decline in the second quarter, with the year-on-year decline rate increasing from 9% in the first quarter to 12%, marking the largest single-quarter revenue decline since 2012, and slightly exceeding analysts' expected decline of 11%.

The decline in Tesla's profit in the second quarter slowed compared to the first quarter, but the decline still exceeded analysts' expectations. The EPS profit in the second quarter decreased by 23% year-on-year, nearly half of the decline in the first quarter, while analysts expected a decline of 19.2%.

However, the year-on-year decline in gross margin in the second quarter was not as significant as expected, decreasing by 71 basis points to 17.2%, and increased by 9 percentage points compared to the first quarter, while analysts expected a year-on-year decline to 16.5%.

In the second quarter, Tesla's free cash flow plummeted by 89% year-on-year to $146 million. Although it remained positive, this was partly due to $320 million in "other income." Additionally, due to an increase of $284 million in the holding gains of digital assets, specifically Bitcoin, Tesla's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) also increased by $284 million, accounting for over 8% of the total EBITDA of $3.4 billion.

Tesla's slightly positive free cash flow can also be attributed to the company's capital expenditure growth rate still being below the level needed to reach the $10 billion annual expenditure target. Achieving this goal means that capital expenditures in the next two quarters will need to exceed $3 billion each. Tesla's capital expenditures in the first and second quarters were nearly $1.5 billion and $2.4 billion, respectively.

As in previous quarters, Tesla's revenue from regulatory credit points from "carbon selling" further declined, impacting revenue and profit. In the second quarter, "carbon selling" revenue was $439 million, reaching a one-year low, a quarter-on-quarter decrease of 26.2%, marking a decline for four consecutive quarters, and halving compared to a year ago, with a year-on-year decrease of 50.7%.

Automotive Business Revenue Decreased by 16% in the Second Quarter, Energy Storage Business Gross Margin Reached New High, Supercharging Network Boosted Service Revenue Growth by 17%

In its main business, Tesla's automotive revenue has experienced a double-digit year-on-year decline for two consecutive quarters, with a decrease of 16% in the second quarter, slightly slowing from a 20% drop in the first quarter.

The sluggishness of Tesla's automotive business was anticipated by the market. Earlier this month, Tesla announced that its second-quarter delivery volume fell approximately 13.5% year-on-year to 384,000 units. Although this was better than the market's pessimistic expectation of 350,000 units, it marked the largest single-quarter delivery decline in the company's history.

Compared to a year ago, the growth of Tesla's energy business revenue further slowed in the second quarter, with a year-on-year decline of 7%. In the first quarter, it had surged by 67%, but compared to the first quarter, the second quarter's business revenue still saw a quarter-on-quarter increase of 2.2%.

Tesla stated that the deployment capacity of its energy business, calculated on a trailing twelve months (TTM) basis, has once again increased, setting a record for 12 consecutive quarters. Among them, the deployment of Powerwall products has set a record for the highest single-quarter deployment for the fifth consecutive quarter. The gross profit of the energy business in the second quarter increased both quarter-on-quarter and year-on-year, reaching a record high of $846 million for a single quarter.

A highlight of the second quarter's business was the "service and other revenue," which grew by 17% year-on-year to $3.05 billion, with a quarter-on-quarter gross profit increase of 64%. Tesla attributed this part to the revenue growth from its Supercharger network. The company mentioned that the net increase of Supercharger stations exceeded 2,900, a year-on-year increase of 18%.

Plans to Launch New Cars This Year, Affordable Models in Trial Production in the First Half, Cybercab and Semi Planned for Mass Production Next Year

In the product outlook of the financial report, Tesla did not completely replicate the statements from the first quarter report but reiterated that it is still on track to launch new cars this year, including more affordable models. The report stated:

"We will continue to focus on prudently increasing vehicle production through efficient capital expenditures by utilizing existing capacity before building new production lines. The plan to launch new vehicles in 2025 is still on track, including a more affordable model that will enter trial production in the first half of 2025."

Like the fourth quarter and first quarter reports, this report also projected that Tesla's product specifically designed for Robotaxi—Cybercab "is planned to begin mass production in 2026."

In the overview of the financial report, Tesla more clearly mentioned the plans for the launch of affordable cars and the mass production of the Semi truck, stating:

"We continue to expand our automotive product line, including the first economy model launched in June, with plans for mass production in the second half of 2025. Additionally, we are continuing to develop the Semi and Cybercab, both planned for mass production in 2026."

The Second Quarter Marks a Milestone in Transitioning to AI and Robotics Leadership, Preparing for a Broader Launch of FSD in China

In commenting on the second-quarter performance, Tesla stated: "The second quarter of 2025 is a milestone in Tesla's history: we are transitioning from a leader in the electric vehicle and renewable energy industries to a leader in artificial intelligence (AI), robotics, and related services."Tesla mentioned the launch of its first batch of Robotaxi services last month, which is only applicable to a dozen Model Y vehicles within Austin, Texas. Tesla acknowledged that the "initial scope of the Robotaxi service is limited," but stated that "our autonomous driving solution—using a pure camera architecture and leveraging data from millions of vehicles worldwide to train the neural network" can continuously enhance safety, rapidly expand the service network scale, and improve profitability.

Tesla CEO Elon Musk stated two weeks ago that Tesla is expanding the Robotaxi service range in the Austin area and is awaiting regulatory approval to launch this service in the California Bay Area, which could be rolled out in a month or two. At that time, media learned that Tesla also plans to extend the Robotaxi service to Arizona. California regulators revealed to the media this month that Tesla has not yet applied for the necessary permits to test or deploy autonomous vehicles.

This Wednesday, media reported that Tesla is in preliminary talks with officials in Nevada to plan the launch of Robotaxi services in the state.

In terms of AI and software, Tesla's latest financial report mentioned that it will further improve and expand the Robotaxi service to cover more vehicles and a wider area, ultimately achieving operation without a safety driver while testing in other cities in the U.S.

Tesla disclosed that it has deployed an additional 16,000 NVIDIA H200 GPUs at its Texas Gigafactory, expanding AI training computing power, bringing the total number of H100 GPUs equipped in Texas's supercomputing cluster Cortex to 67,000.

Tesla also mentioned that it will continue preparations for a broader rollout of the supervised version of its Full Self-Driving (FSD) software in China this year, currently awaiting regulatory approval.

The impact of tariffs, fiscal policy, and political sentiment remains unclear, but R&D and capital expenditures continue

This Tesla financial report reiterated the impact of the tariff war initiated by the Trump administration mentioned in the first quarter report, echoing the statements from the quarterly report:

"It is difficult to measure the impact of changes in global trade policy on the automotive and energy supply chains, our cost structure, and the demand for durable goods and related services. We are making prudent investments to prepare for growth in our automotive and energy businesses, but this year's growth rate will depend on various factors, including the acceleration of our autonomous driving business, increased factory output, and the broader macroeconomic environment."

Additionally, this financial report added:

"Although the impact of tariff changes, fiscal policy changes, and political sentiment remains unclear, leading to continued uncertainty in the macroeconomic environment, we are still continuing to make high-value investments in capital expenditures and R&D while ensuring a strong balance sheet."