Tesla’s income and earnings drop, concluding a challenging 2025

Tesla Faces Challenging Year as Profits and Revenue Decline

A Tesla charging station located in Bochum, Germany. - Ina Fassbender/AFP/Getty Images

Tesla experienced a significant downturn in both revenue and profit during the final quarter, marking its toughest year since achieving profitability six years ago.

According to Tesla’s report on Wednesday, adjusted earnings dropped by 16% in the last quarter of 2025. Net income fell even more sharply, plunging 61% for the quarter and 46% over the year, amounting to a $3.3 billion decrease.

This decline was largely anticipated, as the company saw its steepest year-over-year drop in sales volume during the fourth quarter. Tesla’s earnings have now decreased in nine out of the past ten quarters. By 2025, the automaker’s annual profit had dwindled to just 30% of its record $12.6 billion in 2022.

Once celebrated as the fastest-growing and most profitable car manufacturer, Tesla’s recent financial woes mark a dramatic shift. The company, which played a pivotal role in popularizing electric vehicles, is now grappling with falling EV sales. As a result, CEO Elon Musk and his supporters on Wall Street have shifted their attention to ambitious projects like self-driving robotaxis and humanoid robots, though these innovations have yet to deliver on their promises.

Despite a global increase in EV demand, Tesla’s worldwide sales declined in the quarter. The brand’s image suffered among some consumers in the US and Europe, partly due to controversy surrounding Musk’s political involvement. Additionally, the removal of a $7,500 US tax credit for electric vehicles led to a broader drop in American EV sales later in the year.

Competition has intensified, especially in China—Tesla’s second-largest market after the US. In 2025, Tesla lost its position as the world’s top electric vehicle producer to China’s BYD.

Interestingly, these setbacks have not been mirrored in Tesla’s stock price.

Since returning to focus on Tesla after stepping away from the Trump administration, Musk has prioritized the development of robotaxis and humanoid robots. The anticipation surrounding these projects helped drive Tesla’s stock to a record high in December, though shares have since pulled back from that peak.

After the company announced plans to expand its robotaxi service to seven additional markets in the first half of this year—adding to the two markets it currently serves, where Tesla employees act as “safety monitors”—Tesla’s stock (TSLA) rose about 3% in after-hours trading.

Previously, Tesla had stated its robotaxi service would reach half of the US population by the end of 2025. Three months ago, the company revised this goal to eight to ten markets by year’s end.

This story is ongoing and will be updated as new information becomes available.