Image Source: Tesla
By Brian Nelson, CFA
Tesla (TSLA) recently reported better than expected fourth quarter results, but revenue of $24.9 billion fell 3% in the quarter driven by lower automotive revenues, which declined 11% year-over-year. The consensus revenue estimate was $24.8 billion. Total gross profit fared better, however, advancing 20%, but income from operations dropped 11%, to $1.41 billion in the quarter. Its operating margin contracted 50 basis points year-over-year. Adjusted EBITDA fell 4%, as its adjusted EBITDA margin fell 17 basis points. Non-GAAP net income dropped 16% in the quarter, while non-GAAP earnings per share fell 17%, to $0.50, a nickel better than expected.
Management had the following to say about the results:
2025 marked a critical year for Tesla as we further expanded our mission and continued our transition from a hardware-centric business to a physical AI company. We laid the foundation for the future of Tesla as we further advanced FSD (Supervised), launched our Robotaxi service, began installing production lines for Cybercab and fine-tuned our production-primed Optimus design while expanding our AI training infrastructure.
Our approach to autonomous vehicles and humanoid robots mirrors the way we approached electric vehicles and energy storage – at the system level where we identify the limiting factor and develop bespoke and scalable solutions (batteries, power electronics, inverters, software, AI silicon, etc.) to optimize for cost, functionality, efficiency and safety. Our vertical integration has enabled us to achieve economies of scale in a profitable manner, quickly troubleshoot bottlenecks in production and iteratively optimize our technologies more rapidly than others.
In 2025, we completed the refresh of our vehicle lineup with the launch of the new Model Y, including additional variants. We believe that maintaining an optimized and efficient product portfolio, with a continued focus on high-value features such as long range, best-in-class software and autonomy, is the correct strategy to win the autos market of the future. Similarly, we continued to evolve our energy offerings for commercial, utility and retail customers, as we position ourselves as a supplier of choice for clean, affordable and rapidly deployable energy capacity ahead of expected sustained demand growth for electricity.
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, while further leveraging our existing factory, charging and service center footprint to support future growth.
Tesla’s cash flow metrics deteriorated in the quarter. Net cash from operating activities fell 21%, and while the firm reduced capital spending by 14%, free cash flow still dropped 30% year-over-year. Cash, cash equivalents and investments totaled $44.1 billion at the end of the quarter, while total debt came in at $8.15 billion. Tesla’s automotive business continues to face pressure from the expiry of government tax incentives and increased competition in China and Europe, though it did provide an upbeat view on the future of Robotaxi growth and the progress of its robotics Optimus program. Tesla’s shares, however, are trading well above our fair value estimate, and we view them as a pass for now.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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