Tesla posts $840M Q4 profit, down 61%, as vehicle sales fall and investment in AI and self-driving tech rises sharply
NEW YORK: Tesla reported a sharp 61% drop in fourth-quarter profit as electric vehicle sales declined and spending on artificial intelligence surged.
Profit for the quarter ending December 31 fell to $840 million, down from $2.1 billion a year earlier. Revenue also dipped 3.1% to $24.9 billion.
The results cap a turbulent year marked by lower auto deliveries and CEO Elon Musk’s controversial political activities.
Tesla’s full-year 2025 vehicle sales fell 9% to 1.6 million units amid stiff competition.
A company presentation cited multiple factors for the profit decline. These included higher restructuring costs and increased research and development funding for AI projects.
The company also noted a drag from higher tariffs and reduced revenue from emission tax credits following policy reversals under the Trump administration.
Notably, Tesla’s outlook omitted a projection for 2026 auto sales. The company said it was focused on “maximum capacity utilization” at its factories, adding that total deliveries would depend on “aggregate demand for our products.”
Tesla announced a $2 billion investment in Musk’s xAI artificial intelligence venture on January 16.
The company said the agreement “builds upon the existing relationship between Tesla and xAI by providing a framework for evaluating potential AI collaborations.”
Musk has aggressively promoted Tesla’s technological ambitions in AI and self-driving systems.
At the World Economic Forum this month, he described self-driving cars as “essentially a solved problem at this point.”
He predicted the service will be “very widespread” in the United States by the end of 2026. However, analysts remain skeptical of Musk’s ambitious timelines.
CFRA Research noted Tesla’s “near-term” execution risk is “high,” pointing to a series of Musk’s 2026 targets.
“Musk has a poor track record of delivering on his promises, but the market has been forgiving,” CFRA said.
Only 12% of Tesla’s current fleet participates in its Full Self-Driving subscription program, officials said in October.
Investors are keen for updates on plans to expand the robotaxi service beyond initial testing in Austin.
Tesla shares rose 3.0% in after-hours trading following the earnings release. The stock had risen sharply in late 2025 despite weaker financial results, as bulls focused on the company’s long-term growth potential.
