Tesla Inc (NASDAQ:TSLA) reported a 23% drop in second-quarter adjusted earnings on Wednesday as the electric vehicle maker continued to grapple with declining demand, global trade headwinds and softer automotive margins.
Adjusted earnings per share fell to $0.40, missing analysts’ expectations of $0.42, while total revenue declined 12% year-over-year to $22.5 billion, slightly below estimates of $22.64 billion.
Automotive revenue, which accounts for the bulk of Tesla’s business, dropped 16% to $16.66 billion.
Operating income plunged 42% to $920 million, while free cash flow sank 89% to $146 million. Deliveries fell 13% from a year ago to 384,122 vehicles, with global production largely flat at 410,244 units.
“Q2 2025 marks a seminal point—Tesla is transitioning from EV leader to AI and robotics leader,” CEO Elon Musk said, highlighting the launch of Tesla’s first robotaxi service in Austin, including autonomous delivery of the Model Y, as a key milestone.
Despite macroeconomic pressures, including tariffs and policy shifts that impacted volume growth, the company said it remains committed to funding its product roadmap and expansion plans.
Gross margin declined 71 basis points to 17.2%, though it remained above expectations of 16.5%. Tesla said future profitability would be increasingly driven by AI, software, and monetization of its fleet, rather than hardware sales alone.
The company maintained its target to begin production of its affordable EV model in the first half of 2025, while aiming for a 2026 volume launch of its “Cybercab” robotaxi using a new “unboxed” manufacturing method.
Energy generation and storage revenue dropped 7% to $2.79 billion, while the services and other segment rose 17% to $3.05 billion. Tesla noted its Shanghai Megapack factory has started deliveries, supporting what Musk called a “12th consecutive record” for trailing twelve-month energy storage deployments.
Shares fluctuated in afterhours trading but had lost around 1.4% as of 4:30pm ET.