Tesla Q4 earnings updates: Wall Street analysts are jittery over sales slump, AI roadmap

Last July, Musk alerted investors that Tesla would likely have a “few rough quarters” of car sales.

The latest deliveries and production update, released on January 2, reaffirmed that the company isn’t out of the woods yet. Tesla delivered 418,227 cars in the last three months of 2025, a 15% drop from a year earlier.

Much of the quarterly drop was expected. The federal government’s $7,500 tax credit for new EV buyers expired in the third quarter, prompting some Tesla shoppers to pull forward purchases. However, even with that Q3 bump, Tesla’s full-year vehicle deliveries fell 8.6% compared with 2024.

Tesla recently restarted development of Dojo 3, its in-house AI training supercomputer — but with a twist. Instead of only training self-driving cars, Musk said the new system is aimed at “space-based AI compute.”

In August, Tesla shut down Dojo and disbanded the team, planning to rely on chips from Nvidia and other partners instead. But on January 18, Musk posted on X that Tesla’s Samsung and TSMC-built AI5 chip was now “in good shape,” making it possible to resurrect the project.

Elon Musk first revealed Tesla’s second-generation Roadster — a two-door electric supercar with a blistering 1.9-second 0-60 mph time — in 2017. While the company has collected thousands of $50,000 reservations for the racer, every earnings deck since 2020 has listed the vehicle as in “development.”

Some customers are getting frustrated with a lack of progress, with several high-profile reservation holders like Sam Altman and Marques Brownlee canceling their reservations. But there’s recent momentum building around the Roadster, Business Insider’s Grace Kay reported

During an interview with Joe Rogan, Musk said the car’s next reveal will be on April Fools Day. He added that the car will include parts built by SpaceX and teased that it might be capable of some fancy tricks, calling it “the most memorable product unveil ever.”

The CEO typically avoids making product announcements during earnings calls, so we likely won’t get a major reveal today. But we’ll be looking to see how the model is listed on the earnings deck later today.

Chinese EV maker BYD sold more cars than Tesla last year — and it wasn’t even close.

The Shenzhen-based automaker delivered more than 2.26 million battery-electric cars to global consumers. Tesla sold 1.65 million in the same time.

“The story is that 2025 marks the year Tesla lost the BEV crown to BYD,” Howard Yu, a professor at IMD Business School, wrote to Business Insider. “And not by a little. It’s a 620,000-unit gap that didn’t exist two years ago.”

Tesla’s best-selling cars — the Model Y and the Model 3 — both received facelifts in early 2025. The design updates added LED light bars on the headlight and taillight, sharper body angles that increased battery range, and more ambient lighting on the interiors.

In the auto industry, design refreshes typically trigger months of growing sales. For Tesla, however, sales have continued to slide.

Musk is known for his optimistic timelines, and Tesla’s robotaxi rollout is no exception.

The billionaire predicted that by the end of 2025, Tesla’s robotaxi service would be operating in 8-10 metro cities, cover half the US population, and have 500 vehicles on the road in Austin.

Tesla didn’t hit any of those targets. It did, however, remove safety drivers from its vehicles in Austin this month. Tesla is planning to launch robotaxis in multiple US cities this year, and investors will be watching the earnings call closely for any updates.

Analysts at JPMorgan lowered their EPS estimate for Tesla to $0.43 from $0.48 after the carmaker missed its fourth-quarter delivery target. Tesla recently reported a 16% year-over-year drop in deliveries for the fourth quarter.

“The -16% y/y decline in 4Q25 deliveries is the worst ever for Tesla,” analysts wrote in a recent client note, adding that Tesla’s stock price looked “increasingly divorced” from the company’s “rapidly declining earnings outlook.”

The bank reiterated its “underweight” rating on Tesla and $150 price target, implying 65% downside from the stock’s current levels.

Wells Fargo said it remains pessimistic about Tesla’s business fundamentals. The bank said it believed the company would continue to see “moderating delivery growth” this year, pointing to lower demand for Teslas and diminishing returns on the company’s price cuts.

“2026 Fundamentals look weak, leaving no support if Robotaxi/Optimus disappoint,” analysts wrote in a client note.

The bank reiterated its “underweight” rating on the stock but lifted its price target to $130 a share, citing updated growth estimates for Tesla’s car business. The price target implies 70% downside from Tesla’s current levels.

Tesla’s sales in the US, China, and Europe fell sharply in 2025 — and in January it reported its second consecutive annual sales decline. Still, the automaker’s stock has jumped to near record highs, boosted by optimism around self-driving and AI.

“The market doesn’t seem to place much emphasis on Tesla’s current automotive business, even as deliveries are declining,” Seth Goldstein, an analyst at Morningstar who closely monitors Tesla, told Business Insider.

Tesla stock looks like it’s already largely priced in the bull case, which relies on the success of the company’s robotaxi business and Optimus, Tesla’s humanoid robot. But returns for those projects may not be realized in the near future, UBS analysts said.

“So in our view, given a declining valuation for TSLA’s EV business, the market is already assigning a higher and higher value to the AI ventures. While the TAM for these ventures may be large, they could also be further out,” the bank wrote.

UBS issued a “sell” rating and a $247 price target, implying 43% downside from current levels.

Tesla’s progress on AI has been “slower than anticipated,” Oppenheimer said.

The firm pointed to continued progress Tesla would need to make before beginning the production of Optimus, and the expectation that the company will roll out robotaxis in more cities across the US this year.

“We see downside risk to 2026 consensus as we continue to anticipate delays in Robotaxi performance and Optimus ramp in context of a challenging EV demand environment for TSLA,” the firm wrote.

Analysts issued a “perform” rating on Tesla and trimmed their fourth-quarter revenue estimates from $24.08 billion to $23.7 billion.

Cantor analysts highlighted potential catalysts that could boost Tesla’s stock down the line, like the company rolling out full self-driving in China and Europe, expanding its robotaxi presence across the US, and launching Optimus commercially in 2027.

The firm’s analysts reiterated its “overweight” rating on the stock and set a $510 price target, implying 17% upside from Tesla’s current levels.

Wedbush, a longtime Tesla bull, remains optimistic about Tesla’s AI and robotics projects.

The research firm said it believed Tesla could hit a $2 trillion valuation in the next year as the company begins “full scale volume production” of some of its autonomous and robotics products.

“We believe Tesla will own ~70% of the global autonomous market over the next decade as no other company can match the scale and scope of Tesla coupled with its broadening AI footprint,” a team led by Dan Ives wrote in a note.

The firm reiterated its “outperform” rating and issued a $600 price target on Tesla, implying 38% upside from current levels.

Fourth Quarter

• Adjusted EPS estimate 45c (Bloomberg Consensus)
• EPS estimate 34c
• Revenue estimate $25.11 billion
• Gross margin estimate 17.1%
• Operating income estimate $1.32 billion
• Free cash flow estimate $1.59 billion
• Capital expenditure estimate $2.83 billion

Source: Bloomberg data