Tesla, Inc. (TSLA) Q4 2025 Earnings Call Transcript
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Overview
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.
Key Financial Performance
Automotive Margins Automotive margins, excluding credits, improved sequentially from 15.4% to 17.9%. The automotive gross profit was flat sequentially despite 16% lower deliveries, primarily due to regional mix as we had proportionately more deliveries in APAC and EMEA.
FSD Adoption FSD adoption continued to improve in the quarter, reaching nearly 1.1 million paid customers globally. Of these, nearly 70% were upfront purchases. Beginning this quarter, Tesla is transitioning fully to a subscription-based model for FSD, which will impact automotive margins in the short term.
Energy Revenue Tesla achieved nearly $12.8 billion in revenue at 26.6% year-over-year growth. This was due to higher deployments in all regions and continued strength in demand for both Megapack and Powerwall.
Services and Others Margin Services and others margin declined from 10.5% to 8.8%, primarily from higher employee-related costs for service centers and early-phase Robotaxi business-related costs. However, there was an improvement in margin from the supercharging business.
Total Gross Margin Tesla ended the quarter with over 20.1% total gross margin, a level not achieved in the last 2 years. This improvement came despite the impact of lower fixed cost absorption and tariffs exceeding $500 million in Q4.
Net Income Net income was negatively impacted by mark-to-market charges on Bitcoin holdings, which depreciated 23% compared to the last quarter, and unfavorable FX impacts from large intercompany borrowings.
Free Cash Flow Tesla ended the quarter with $1.4 billion in free cash flow. CapEx was slightly below the previous guidance of $9 billion, but significant investments are planned for 2026, exceeding $20 billion.
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Operating Highlights
Optimus Robot: Tesla plans to replace the Model S and X production line in Fremont with a factory for Optimus robots, targeting 1 million units per year. Optimus 3 will be unveiled soon, featuring advanced capabilities like learning tasks through observation or verbal instructions.
Full Self-Driving (FSD): Tesla is transitioning to a subscription-based model for FSD, which has reached 1.1 million paid customers globally. Fully autonomous vehicles are expected in 25%-50% of the U.S. by year-end, pending regulatory approval.
Energy Products: Tesla achieved $12.8 billion in energy revenue in 2025, with strong demand for Megapack and Powerwall. New products like Megapack 3 and Megablock are expected to drive future growth.
Global Market Expansion: Record deliveries were achieved in smaller countries like Malaysia, Norway, Poland, Saudi Arabia, and Taiwan, with continued strength in APAC and EMEA regions.
Automotive Margins: Automotive margins improved from 15.4% to 17.9%, despite a 16% drop in deliveries, due to regional mix favoring APAC and EMEA.
CapEx Investments: Tesla plans to invest over $20 billion in 2026 for new factories, AI compute infrastructure, and expanding existing facilities.
Shift to Autonomy: Tesla is ending Model S and X production to focus on autonomous vehicles and Optimus robots, aligning with its vision of an autonomous future.
Solar Cell Manufacturing: Tesla aims to produce 100 gigawatts of solar cells annually, integrating the entire supply chain from raw materials to finished panels.
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Risk or Challenges
Battery Pack Constraints: Tesla's global operations are constrained by battery pack availability, which remains a significant bottleneck despite efforts to resolve the issue by using 4680 cells in nonstructural packs.
Margin Compression in Energy Business: Tesla's energy business faces margin compression due to increased low-cost competition, policy uncertainty, and the cost of tariffs.
High CapEx Requirements: Tesla plans to spend over $20 billion in capital expenditures in 2026 for new factories, AI compute infrastructure, and fleet expansion, which could strain financial resources.
Transition to Subscription Model for FSD: The shift to a subscription-based model for Full Self-Driving (FSD) is expected to impact automotive margins in the short term.
Tariff Costs: Tesla incurred over $500 million in tariff costs in Q4 2025, which negatively impacted gross margins.
Employee-Related Costs: Higher employee-related costs for service centers and stock-based compensation have increased operating expenses.
Bitcoin Depreciation: Tesla's net income was negatively impacted by a 23% depreciation in Bitcoin holdings.
Regulatory Approval for Autonomous Vehicles: The rollout of fully autonomous vehicles is dependent on regulatory approval, which may vary city by city or state by state, potentially delaying deployment.
New Supply Chain for Optimus Robot: The Optimus robot's production ramp is expected to be slower due to the need for a completely new supply chain, which could delay scaling.
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Guidance & Outlook
Capital Expenditures (CapEx): Tesla plans to spend over $20 billion in CapEx for 2026, which includes investments in six factories (refinery, LFP factories, Cybercab, Semi, a new Megafactory, and the Optimus factory), AI compute infrastructure, and expansion of existing factories and related infrastructure. This is a deliberate strategy to position the company for the next era.
Autonomous Vehicles and Robotaxi: Tesla expects to have fully autonomous vehicles operational in 25%-50% of the United States by the end of 2026, pending regulatory approval. The Robotaxi fleet will expand, and existing Tesla owners will have the opportunity to add their vehicles to the autonomous fleet, potentially earning more than their lease costs.
Optimus Robot Production: Tesla plans to convert the Model S and X production space in Fremont into an Optimus factory with a long-term goal of producing 1 million units per year. Optimus 3, a general-purpose robot capable of learning tasks through observation, will be unveiled in a few months.
Energy Business Growth: Tesla expects high growth in its energy business, driven by increased manufacturing capacity and strong demand for Megapack and Powerwall. The company aims to produce 100 gigawatts of solar cells annually, integrating the entire supply chain from raw materials to finished panels.
Full Self-Driving (FSD) Transition: Tesla is transitioning to a subscription-based model for FSD, which will impact automotive margins in the short term. FSD adoption has reached 1.1 million paid customers globally, with 70% being upfront purchases.
Market Expansion and Demand: Tesla ended 2025 with a larger backlog than in recent years, driven by increased demand in smaller countries and regions like Malaysia, Norway, Poland, Saudi Arabia, and Taiwan. The company plans to ramp up production at all factories in 2026.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Does Tesla have a view based on its Robotaxi ambition on the number of cars sold globally in 5 or 10 years, and how does this impact Tesla's EV strategy?
A:Tesla believes the future is autonomous, with autonomy and Cybercab significantly changing the global market size and mix. Cybercab, a dedicated 2-seater Robotaxi without a steering wheel or pedals, is expected to dominate production, eventually surpassing all other Tesla vehicles combined. Production is set to start in April, with an S-curve growth trajectory.
Q:Are there plans to launch new models to address different price segments and vehicle types to expand Tesla's TAM?
A:Tesla has launched its least expensive models recently and continues to expand globally. The Cybercab aims to bring Tesla's premium ride experience to a larger market, potentially 5-10x current production levels. Tesla plans to offer Robotaxis in various shapes and sizes, with Cybercab being the majority of the volume.
Q:Are there stand-alone gross margin targets for current models, excluding FSD sales?
A:Tesla's management emphasized a holistic view of transportation, focusing on autonomy software as the growth driver. The Cybercab is optimized for minimum cost per mile and high duty cycles, designed for continuous operation. Tesla plans to transition to producing only autonomous vehicles, except for the next-generation Roadster.
Q:What is the current bottleneck to increase Robotaxi deployment and personal use unsupervised FSD?
A:Tesla has scaled its Robotaxi service to learn from fleet scaling problems and solve unsupervised FSD issues. Unsupervised Robotaxi service has started in Austin, with improvements in software performance. Tesla's vast charging and service network supports scaling for autonomous vehicle demand.
Q:How practical would it be to create a conventional-looking pickup on the Cybertruck architecture?
A:The Cybertruck line is designed to be flexible and ready for autonomy. Tesla could transition the line to fully autonomous production, with potential applications for localized cargo delivery.
Q:What is the current status of Optimus robots in Tesla factories, and how has their integration impacted efficiency?
A:Optimus is still in the R&D phase, performing basic tasks in factories. Significant production volume is expected by the end of the year. Optimus Gen 3 is designed to mimic human tasks, aiding AI strategy. Tesla plans to increase headcount and factory output.
Q:When is FSD going to be 100% unsupervised?
A:FSD is already 100% unsupervised in Austin, with no safety monitors or follow cars. Tesla is cautious with rollout, addressing unique city-specific challenges and prioritizing safety. Driver monitoring will reduce as FSD safety improves.
Q:What has surprised Tesla about the Robotaxi rollout, and can the fleet size be confirmed?
A:Tesla has not faced surprises due to extensive metrics and preparation. Over 500 Robotaxi vehicles are operating between the Bay Area and Austin, with fleet size expected to double monthly. Tesla's infrastructure supports scaling.
Q:What was the reason behind Elon Musk's increased involvement in Tesla's chip design, and will external chip sales be significant by the end of the decade?
A:Elon Musk prioritizes AI5 chip design as critical for Tesla's growth, spending significant time on it. AI5 and AI6 chips will be used for Tesla's vehicles, Optimus robots, and data centers. External chip sales are unlikely due to Tesla's internal needs. Tesla plans to build a domestic Terafab to address future chip supply constraints and geopolitical risks.
Q:What is the reason for Tesla's increased CapEx, and how will it be funded?
A:Tesla's CapEx increase to over $20 billion is due to starting production in six factories, scaling Optimus, and expanding existing factories. Funding will come from internal resources, bank loans for Robotaxi fleets, and potentially more debt for infrastructure projects like solar and chip fabs.
Q:What is the purpose of Tesla's investment in xAI, and how will it benefit Tesla?
A:Tesla's investment in xAI aligns with its Master Plan IV, leveraging xAI to accelerate progress in managing autonomous fleets and Optimus robots. Grok, developed by xAI, will optimize fleet efficiency and robot orchestration.
Q:Are there near-term constraints on memory procurement, and how is Tesla addressing them?
A:Tesla's AI is highly memory-efficient, reducing constraints. Tesla has solutions for the next three years but foresees supplier limitations beyond that. Plans include building a domestic fab to ensure chip and memory supply, addressing geopolitical risks.
Q:What are Tesla's competitive advantages in the humanoid robot market, particularly against Chinese competitors?
A:Tesla's advantages include advanced hand design, real-world AI, and scalable production. China is seen as the toughest competitor due to its manufacturing and AI capabilities. Tesla believes Optimus will be more capable than any Chinese robot.
Q:How is Tesla managing R&D spending and synergies across its technology development programs?
A:Tesla focuses on scaling autonomous vehicles, humanoid robots, and addressing geopolitical risks. Investments in advanced lithium and cathode refineries ensure supply chain security. Tesla emphasizes necessity-driven innovation to maintain growth and resilience.
Q:Review of Unclear Management Responses
A:Management avoided providing specific gross margin targets for current models, emphasizing a holistic view of transportation and autonomy software as growth drivers. They also did not provide detailed timelines for Optimus robot integration or specific memory procurement strategies beyond three years.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
APAC EMEA
Airbnb
Cybercab Semi
Elon
GDP
Model production
Model program
Robotaxi
Tesla mission
Tesla scenario
abundance
backlog
car Austin
cell
charge
city state
front record
infrastructure
margin
momentum
opportunity
problem value
program end
record term
respect
ride safety
safety monitor
space Fremont
subscription model
term deployment
value problem
way sense
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
Frequently Asked Questions
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