Tesla, Inc. (TSLA) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Despite management's avoidance of certain topics, the overall sentiment is positive due to strong advancements in autonomous technology, energy storage, and potential market expansion. The Q&A highlights a focus on growth and innovation, with optimistic guidance for robotaxi operations and affordability improvements. While some uncertainties remain, the strategic initiatives and positive outlook for FSD and robotaxis suggest a favorable stock price reaction.
Key Financial Performance
Automotive Revenue Increased by 19% sequentially, even though total deliveries only improved 14%. This was primarily due to improved Average Selling Prices (ASPs) because of the new Model Y. This helped in improving margins sequentially as well, along with improved mix and higher fixed cost absorption despite an increase in cost from tariffs.
Tariff Costs Sequentially, the cost of tariffs increased around $300 million with approximately 2/3 of that impact in automotive and the rest in energy. The full impact will come through in the following quarters, leading to increased costs in the near term.
Energy Generation and Storage Margins Improved sequentially, while deployment reduced primarily due to the ramp of power deployments at higher margins. Achieved the highest gross profit for the business yet.
Service and Other Businesses Margins Improved sequentially, primarily due to higher profits from supercharging and improvement in insurance and service center profitability.
Operating Expenses Grew sequentially due to continued investment in AI projects, including additional expenses related to employee-related costs, higher stock-based compensation, and depreciation for AI compute.
Other Income Grew sequentially, primarily from the mark-to-market adjustment on Bitcoin holdings, which was a $284 million gain in Q2, compared to a $125 million loss in Q1.
Free Cash Flow $146 million, resulting from increased operating cash flows and higher CapEx due to investments in manufacturing and AI initiatives.
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Operating Highlights
Robotaxi: Successfully launched in Austin with paying customers and plans to expand to other U.S. regions, targeting half the U.S. population by year-end, subject to regulatory approvals.
Tesla Diner: Launched a unique diner in L.A., gaining worldwide attention.
Optimus Robot: Evolving design to version 3, aiming for scale production next year with a target of 1 million units annually within 5 years.
New Model Y: Started ramping up production globally, contributing to increased automotive revenue and margins.
Market Expansion for Robotaxi: Plans to expand autonomous ride-hailing to Bay Area, Nevada, Arizona, Florida, and other regions, pending regulatory approvals.
Model Y Sales: Became the best-selling car in Turkey, Netherlands, Switzerland, and Austria.
FSD in Europe and China: Working on regulatory approvals to expand supervised FSD in Europe and China, which are expected to drive significant demand.
Energy Business: Record Powerwall deployments and expanding Megapack capacity despite tariff and supply chain challenges.
Automotive Revenue: Increased by 19% sequentially due to improved ASPs and higher fixed cost absorption.
Tariff Impact: Sequential cost increase of $300 million, affecting automotive and energy businesses.
AI and Robotics Investment: Continued investment in AI projects and robotics, including Optimus and FSD, to maintain long-term leadership.
Energy Storage: Positioning industrial storage as a key enabler for AI and data center growth.
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Risk or Challenges
Regulatory Approvals for Autonomous Ride-Hailing: Tesla's expansion of autonomous ride-hailing services is contingent on obtaining regulatory approvals in various regions, including the Bay Area, Nevada, Arizona, and Florida. Delays or denials in these approvals could hinder the rollout and revenue generation from this service.
Regulatory Challenges in Europe and China: Tesla faces significant regulatory hurdles in Europe and China for supervised Full Self-Driving (FSD) capabilities. These challenges are delaying the availability of key features, potentially impacting sales and customer satisfaction in these regions.
Impact of 'One Big Bill' on EV Credits: The repeal of the $7,500 IRA EV credit by the end of the quarter will reduce incentives for U.S. customers, potentially lowering demand and impacting Tesla's sales and revenue.
Tariff-Related Cost Increases: Tesla is experiencing increased costs due to tariffs, with a $300 million sequential rise in Q2. This will have a more pronounced impact in future quarters, affecting both automotive and energy businesses.
Energy Business Challenges: The energy business faces headwinds from tariffs and the expiration of consumer credits for residential storage by year-end, which could shift demand and profitability.
Ramping New Model Production: The ramp-up of a new lower-cost model is slower than expected due to the focus on delivering vehicles before the EV credit expiration and the complexity of ramping production, potentially delaying revenue from this model.
Bitcoin Price Volatility: Tesla's financials are impacted by the volatility in Bitcoin prices, as evidenced by a $284 million gain in Q2 following a $125 million loss in Q1, creating unpredictability in other income.
Increased Operating Expenses: Tesla's operating expenses are rising due to investments in AI projects, employee-related costs, and depreciation for AI compute, which could pressure margins in the short term.
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Guidance & Outlook
Autonomous Ride-Hailing Expansion: Tesla plans to expand its autonomous ride-hailing service to cover half of the U.S. population by the end of 2025, subject to regulatory approvals. The service area and number of vehicles in operation are expected to grow at a hyper-exponential rate.
Full Self-Driving (FSD) Improvements: Tesla aims to increase the parameter count of its FSD software by 10x, enhancing the autopilot experience. Regulatory approvals in Europe and China are anticipated to boost sales significantly.
Optimus Robot Development: Prototypes of Optimus 3 are expected by the end of 2025, with scaled production targeted for 2026. Tesla aims to reach 1 million units annually within five years.
Energy Storage Growth: Tesla is expanding Megapack capacity and expects batteries to play a significant role in doubling U.S. energy output. Despite tariff challenges, the energy business is growing, with record Powerwall deployments in Q2 2025.
Automotive Production and Revenue: Tesla is ramping up production of a lower-cost Model Y and expects a slower ramp in Q3 2025 due to the expiration of the IRA EV credit. Automotive revenue increased by 19% sequentially in Q2 2025, driven by improved ASPs and higher margins.
Capital Expenditures: Tesla expects CapEx to exceed $9 billion in 2025, focusing on manufacturing, AI initiatives, and energy storage expansion.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you give us some insight into how robotaxis have been performing so far? And what rate do you expect to expand in terms of vehicles, geofence, cities, and supervisors?
A:The robotaxi service has been performing well in Austin, with customers appreciating the smooth and safe experience. The operating region in Austin is expected to expand more than 10x. Testing is ongoing in other cities, including the San Francisco Bay Area, Florida, and Nevada. Expansion plans include launching services without a driver in the seat while awaiting regulatory approval.
Q:What are the key technical and regulatory hurdles still remaining for unsupervised FSD to be available for personal use? Can you provide a timeline?
A:Unsupervised FSD is expected to be available for personal use by the end of the year in certain geographies. The focus is on ensuring safety before broad availability. Tesla is confident about achieving this timeline.
Q:What specific factory tasks is Optimus currently performing? And what is the expected timeline for scaling production to enable external sales? How does Tesla envision Optimus contributing to revenue in the next 2 to 3 years?
A:Optimus 3 design is finalized, with prototypes expected in 3 months and production starting early next year. Scaling production is challenging due to supply chain and internal process issues. Tesla aims to produce 100,000 Optimus robots per month within 5 years. Initial production will not significantly impact revenue due to negative gross margins during the early ramp-up phase.
Q:Can you provide an update on the development and production timeline for Tesla's more affordable models? How will these models balance cost reduction and profitability?
A:Production of more affordable models started in June, with ramping expected in Q4. The goal is to maximize production while maintaining revenue and gross margin. These models aim to be affordable and desirable without negatively impacting financials.
Q:Can you talk about the benefits of Tesla investing in xAI?
A:Management avoided discussing this topic, stating it was not the appropriate forum. Elon Musk encouraged shareholder proposals for further discussion.
Q:Can you tell us a little bit more about what goes on in the Tesla design studio?
A:The design studio focuses on creating an exciting future for Tesla's product lineup. Elon Musk mentioned a fundamental transformation from a pre-autonomy to a post-autonomy world, with Tesla aiming to become the most valuable company globally. Specific details were not disclosed.
Q:Are there any news for Hardware 3 users getting retrofits or upgrades? Will they get Hardware 4 or some future version of Hardware 5?
A:The focus is on achieving unsupervised FSD on Hardware 4 first. Once completed, Tesla will evaluate the requirements for Hardware 3 vehicles.
Q:Can you give an update on Dojo? And could xAI be a customer for Dojo?
A:Dojo 2 is expected to operate at scale next year, with AI5 chips in volume production by the end of next year. Tesla is considering convergence between AI chips for various applications. xAI could potentially be a customer for Dojo.
Q:How will the BBB elimination of tax credits for solar projects affect your sales pipeline for Megapack?
A:Tesla's sales pipeline is diversified, with minimal reliance on solar-paired projects. Growth is expected in data center segments and standalone storage projects. Tesla is investing in U.S. manufacturing to mitigate policy impacts, with a new LFP cell facility online by year-end and a third Megafactory launching in 2026.
Q:Are you able to share any KPIs with us in terms of the robotaxi business? How many vehicles are you operating, miles driven autonomously, or the number of safety-critical interventions?
A:The robotaxi service in Austin has over 7,000 miles of operation with a handful of vehicles. There have been no notable safety-critical incidents. Expansion in vehicles and service areas is ongoing.
Q:How should we think about the main milestones to drive down the cost per mile on robotaxis?
A:The Cybercab, optimized for autonomy, could achieve costs as low as $0.25 per mile. Existing fleet costs may be over $0.50 per mile. Tesla expects robotaxi operations to have a material financial impact by the end of next year.
Q:As Tesla moves into autonomous humanoids and robotaxis, are you comfortable with your current stake in the company?
A:Elon Musk expressed concerns about his 13% stake, emphasizing the need for sufficient control to ensure Tesla's direction aligns with his vision while allowing for accountability.
Q:When will others be able to get a firsthand view of Optimus? Is the second half of this year too soon for an AI Day?
A:Tesla plans to showcase Optimus robots at the Annual Shareholder Meeting. An AI Day is under consideration but may be limited to avoid competitors copying Tesla's advancements.
Q:Can you talk about the opportunity to put non-Tesla-owned vehicles into the robotaxi network?
A:Tesla plans to ensure the system works with Tesla-owned vehicles first. Non-Tesla vehicles may be added next year, subject to safety and validation criteria.
Q:Could you unpack the different costs associated with scaling the robotaxi business and how you think about funding those costs?
A:Tesla will use its balance sheet initially but may explore debt financing once recurring revenues are established.
Q:Are you able to comment more specifically on what you're seeing with FSD subscription trends and take rates?
A:FSD adoption has increased by 25% since the release of version 12 in North America. Tesla is working to educate customers on FSD's benefits, emphasizing safety and affordability.
Q:How are you thinking about pricing to drive increased volumes given FSD monetization potential and the loss of tax credits?
A:Tesla may face rough quarters due to the loss of incentives but expects autonomy at scale to improve financials significantly by the end of next year.
Q:Can you provide more detail about the lower-cost model and its production timeline?
A:Tesla aims to make cars more affordable, with production ramping later this year. The ability to add cars to the robotaxi fleet next year will enhance affordability.
Q:How do you manage the division of efforts and resources between Tesla and xAI?
A:Tesla focuses on real-world AI with smaller models, while xAI works on artificial superintelligence with larger models. The two entities address different problems and attract different talent.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about Tesla's investment in xAI, stating it was not the appropriate forum for discussion. Similarly, details about the Tesla design studio's activities were not disclosed, with management emphasizing the focus on an exciting future without providing specifics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI inference
Austin service
Axelrod Head
Chief
Corporate Participant
Elon
Europe experience
Inc Research
Netherlands
Officer
Research Division
approval
autopilot experience
battery demand
couple week
deal
design point
diner
driver seat
element
gigabyte RAM
intelligence density
naysayer
parameter constraint
parameter count
people parameter
population end
product autonomy
ride hailing
scale battery
service area
terawatt
world AI
xAI
TSLA Transcript
Tesla, Inc. (TSLA) Q4 2025 Earnings Call Transcript
Positive1-28
The earnings call highlights Tesla's robust growth strategy, focusing on expanding production and autonomous services. Positive developments include Robotaxi expansion, Optimus Robot progress, and innovative chip design. Despite increased CapEx, funding is secured through internal resources and loans. The Q&A session revealed no major concerns, with management addressing potential risks effectively. The overall sentiment is positive, with strong future growth prospects.
Tesla, Inc. (TSLA) Q3 2025 Earnings Call Transcript
Positive10-22
The earnings call revealed strong financial performance with record free cash flow and significant cash reserves. The Q&A section highlighted growth in energy storage and autonomous driving initiatives, with regulatory challenges but promising advancements in AI. Despite some concerns about tariffs and unclear responses, the overall sentiment is positive due to strong demand, expansion plans, and optimistic guidance on new technologies.
Tesla, Inc. (TSLA) Q2 2025 Earnings Call Transcript
Positive7-23
Despite management's avoidance of certain topics, the overall sentiment is positive due to strong advancements in autonomous technology, energy storage, and potential market expansion. The Q&A highlights a focus on growth and innovation, with optimistic guidance for robotaxi operations and affordability improvements. While some uncertainties remain, the strategic initiatives and positive outlook for FSD and robotaxis suggest a favorable stock price reaction.
Tesla, Inc. (NASDAQ:TSLA) Q1 2025 Earnings Call Transcript
Unknown4-24
Tesla's earnings call reveals several concerns: a significant EPS miss, operational challenges, and regulatory risks. While there are positive elements like the share buyback program and autonomy advancements, these are overshadowed by financial performance issues and unclear guidance on key projects. The Q&A highlights competitive pressures and economic risks, further contributing to a negative sentiment. Without a clear market cap, the prediction leans towards a negative reaction, likely between -2% and -8%, given the mixed outlook and financial underperformance.
TSLA Slides
TSLA Report
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