Tesla's quarterly profit dropped sharply as Elon Musk's company deals with a slowdown in electric vehicle sales and ballooning costs.
Why it matters: Tesla has ambitions to become an AI powerhouse, but meanwhile it needs EV revenue to pay the bills.
Driving the news: The automaker's net income fell 61% to $840 million in the fourth quarter, compared with a year earlier.
- Revenue declined 3%, to $24.9 billion.
- Operating expenses soared 39%, to $3.6 billion, sending operating margins down to 5.7% from 6.2% a year earlier.
Yes, but: The market is largely focused on Tesla's future, not its current finances.
- The company also said Wednesday that it was investing $2 billion in the preferred shares of xAI, Musk's AI startup.
- Tesla shares were up more than 3% in after-hours trading.
- Musk told the World Economic Forum in Davos last week that Tesla would begin selling humanoids by the end of 2027: "I think everyone on earth is going to have one and want one."
- And the company has already launched self-driving car services in Austin, Texas, with plans to expand throughout the country.
Zoom in: For the quarter, Tesla's vehicle deliveries fell 8.6% in 2025 to 1.64 million.
- The company faced a consumer backlash in early 2025 to Musk's involvement with the Trump administration. He eventually withdrew from leadership of the Department of Government Efficiency.
- Tesla later reaped an influx of sales from buyers seeking to cash in on the federal EV tax credit before it expired at the end of September.
What to watch: Tesla is barreling forward with a production expansion to make the Cybercab driverless vehicle and the Optimus humanoid robot.
- "In 2026, we will further invest in the infrastructure needed to support clean energy and transport and autonomous robots, including the ramp of six new production lines across vehicle, robots, energy storage and battery manufacturing," Tesla said in an earnings presentation.