TLDR
- Tesla stock fell 8.2% after reporting Q2 earnings miss with revenue of $22.50 billion vs. $22.64 billion expected and EPS of $0.40 vs. $0.42 expected
- CEO Elon Musk warned Tesla “probably could have a few rough quarters” ahead as the $7,500 EV tax credit expires at end of Q3
- Revenue from regulatory credits dropped to $439 million from $890 million year-over-year following passage of the One Big Beautiful Bill Act
- Tesla delivered only 384,122 vehicles globally in Q2, marking a 13.5% drop year-over-year
- Robotaxi service expanded testing in Austin with plans to cover half the US population by end of 2026, though analysts remain skeptical of timeline
Tesla stock took a beating Thursday, closing down 8.2% at $305.30 after the electric vehicle maker delivered disappointing second-quarter results. The earnings miss comes as CEO Elon Musk acknowledged potential challenges ahead while continuing to pitch his long-term vision.
The company reported Q2 revenue of $22.50 billion, falling short of the $22.64 billion analysts expected. This represents a 12% decline from the $25.05 billion reported in the same quarter last year. Adjusted earnings per share came in at $0.40, missing the $0.42 consensus estimate.
Operating income dropped to $923 million versus expectations of $1.23 billion. The numbers paint a picture of a company facing mounting pressure from multiple directions. Tesla delivered just 384,122 vehicles globally in Q2, marking a 13.5% year-over-year decline.
One of the most pressing issues facing Tesla is the pending expiration of the $7,500 federal EV tax credit. The credit will disappear at the end of Q3 following passage of the One Big Beautiful Bill Act, which Musk had opposed for months before President Trump signed it into law.
CFO Vaibhav Taneja warned the policy change would create a “pull forward” effect in sales. “Given the abrupt change, we have limited supply of vehicles in the US this quarter,” Taneja said during the earnings call. “We may not be able to guarantee delivery orders placed in the later part of August and beyond.”
Tax Credit Loss Creates Uncertainty
When pressed about the impact of losing the federal tax credit, Musk didn’t sugarcoat the situation. “Tesla probably could have a few rough quarters” ahead following the credit’s expiration, he said. The CEO added he wasn’t guaranteeing rough quarters would happen, but acknowledged the possibility.
The company also saw its revenue from regulatory credit sales plummet to $439 million from $890 million a year earlier. These credits, which Tesla sells to other automakers who can’t meet emissions requirements, have generated $11 billion for the company since 2019.
Tesla said its first builds of a more affordable model occurred in June, with volume production planned for the second half of 2025. However, Taneja noted the company would only ramp up production of this cheaper model once the EV tax credit expired.
The automaker continues to face headwinds in key markets. Weakness in Europe remains an ongoing issue, while US registration data shows sliding domestic sales. The changeover to the refreshed Model Y may have contributed to lower delivery numbers.
Musk spent much of the earnings call discussing Tesla’s robotaxi ambitions rather than addressing near-term challenges. The service has expanded testing in Austin, Texas, with a larger operating area and more vehicles. Tesla said the service would eventually operate without safety riders and expand to other US cities.
Robotaxi Timeline Faces Skepticism
The CEO made bold claims about robotaxi expansion, saying he expects the service to cover half the US population by the end of next year. However, he cautioned that he tends to be overly optimistic with predictions. Analysts remain skeptical of these timelines.
Reports suggest Tesla hasn’t submitted permit applications for San Francisco Bay Area testing despite Musk’s earlier promises. Bloomberg reported the company is in talks with Nevada officials about testing there.
Some analysts are losing patience with Musk’s grand promises. “The street is losing some patience,” said Wedbush Securities analyst Dan Ives, though he maintains faith in Tesla’s autonomous vehicle vision.
CFRA Research analyst Garrett Nelson noted investors have been “very forgiving” of Tesla despite obvious headwinds. “Some of his brilliance has been his ability to keep investors focused on the long term and ignoring the near term,” Nelson said. “Now, headwinds are difficult to ignore.”
The Cybertruck continues to underperform expectations. Musk had promised 250,000 annual deliveries by this year, but full-year sales of the Cybertruck and Tesla’s two other expensive models totaled less than 80,000 vehicles. Sales of these three models dropped 52% in the most recent quarter.
Tesla’s purpose-built robotaxi remains scheduled for volume production starting in 2026. The company also continues development of its Optimus humanoid robot, though specific timelines remain unclear.
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