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Tesla has now published its 4th quarter and full-year financial details and various updates on vehicle models, robots, factories, and its energy business. Steve Hanley is going to cover some of the vehicle and robot news, so I’m jumping into the finances.
One of the big headline stories is that Tesla posted a year-over-year decline in revenue … for the first time ever. Is that an indication of a shift in the company’s story, or just a blip in a long-term growth path? Revenue dropped 3%, from $97.7 billion in 2024 to $94.8 billion in 2025.
In the 4th quarter, Tesla’s revenue dropped 3% year over year, from $25.7 billion to $24.9 billion, but that did beat Wall Street expectations of $24.79 billion. The more concerning thing about the company’s revenue drop would be that its vehicle revenue dropped 11%, from $19.8 billion in Q4 2024 to $17.7 billion in Q4 2025. Vehicle deliveries dropped 16% year over year in the 4th quarter and dropped 8.6% in 2025 year over year.
However, none of that jumped out to me as much as a different update and trend. All of that is about sales, which still look good on the surface in isolation, but what about costs?
Despite declining sales, operating expenses rose a whopping 39% in the 4th quarter, while income from operations dropped 11%. As a result, net income collapsed a whopping 61% year over year! In Q4 2024, it was $2.13 billion. In Q4 2025, it was $840 million.
That long-term trend does not look good.
Some other concerning numbers:
Q4 EPS attributable to common stockholders, diluted (GAAP): -60%
Q4 Net cash provided by operating activities: -21%
Q4 Free cash flow: -30%
2025 operating expenses: +23%
2025 income from operations: -38%
Full year operating margin dropped from 16.8% in 2022 to 9.2% in 2023 to 7.2% in 2024 to 4.6% in 2025.
2025 net income attributable to common stockholders (GAAP): -46%
2025 EPS attributable to common stockholders, diluted (GAAP): -47%
I’ve highlighted before that while Elon Musk hypes up “Full Self Driving” improvements and miles driven, the costs of Tesla’s FSD feature also keep rising. Indeed, Tesla highlighted in its quarterly report that the company’s growing operating costs have been “driven by AI and other R&D projects and SG&A.” This is despite capital expenditures dropping from $2.78 billion to $2.39 billion. Furthermore, Tesla is about to invest $2 billion into Elon Musk’s AI startup xAI. (Oh, by the way, TSLA shareholders voted against doing this last year.)
The company also saw “higher average cost per vehicle due to lower fixed cost absorption for certain models and an increase in tariffs” and “lower regulatory credit revenue.”
The one big positive regarding Tesla’s financial trends was that its energy storage and generation business grew 25%year over year from $3.06 billion to $3.84 billion in the 4th quarter. Across the full year, it rose 27% from $10.1 billion to $12.8 billion.
Another positive for the company was in the “services and other revenue” category. That was up 18% in the 4th quarter, from $2.85 billion to $3.37 billion. Across the whole year, it was up 19%, from $10.5 billion in 2024 to $12.5 billion in 2025.
Overall, the big pluses were 2025 free cash flow rising 74% year over year to $6.2 billion, from $3.6 billion; and 2025 cash, cash equivalents and investments rising 21% from $36.6 billion to $44.1 billion.
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