Strong Financial Performance Despite Volume Decline
Tesla Inc. delivered mixed results in Q4 2025, with financial metrics exceeding expectations despite significant operational headwinds. The electric vehicle manufacturer reported full-year 2025 revenue and adjusted profit after tax and minority interest (PATMI) at 109% and 111% of forecasts respectively, driven primarily by higher-than-expected automotive gross margins. However, adjusted PATMI excluding stock-based compensation declined 16% due to reduced vehicle deliveries, lower regulatory credit revenue, and increased operating expenses from artificial intelligence and research and development projects.
Record Delivery Decline Impacts Core Business
Tesla’s automotive segment faced unprecedented challenges in Q4 2025, with deliveries falling to 418,000 units, representing a 16% year-over-year decline—the company’s largest quarterly drop on record. This decline stemmed directly from the removal of the US$7,500 electric vehicle tax credit, which led to higher vehicle prices and reduced consumer demand. Despite the volume decline, gross margins improved significantly by 3.8 percentage points year-over-year and 2.1 percentage points quarter-over-quarter, while average selling prices rose 6% year-over-year as the company maintained pricing power following the tax credit removal.
Non-Automotive Segments Show Promise
Tesla’s diversification efforts demonstrated positive momentum, with non-automotive revenue growing 22% year-over-year and comprising 29% of total revenue, up from 23% in Q4 2024. Services revenue increased 18% year-over-year, supported by expanding Supercharging network operations that added over 3,800 new stalls, growing the network by 19% annually. Energy generation and storage revenue surged 25% year-over-year, driven by record Megapack deployments, with plans to begin Megapack 3 and Megablock production at the Houston Mega factory in 2026.
Investment Outlook and Recommendation
Phillip Securities Research maintains a SELL recommendation with a reduced DCF target price of US$215, down from US$220 previously. The firm lowered FY26 earnings estimates by approximately 29% due to expected continued automotive delivery declines and increased operating expenses. Key concerns include ongoing headwinds from tariffs, loss of tax credits, declining market share in China where Tesla’s share dropped to 5.7% from 7.2% year-over-year, and the distant timeline for significant revenue contribution from autonomous driving, robotaxi, and robotics initiatives.
Frequently Asked Questions
Q: What was Tesla’s financial performance in Q4 2025?
A: Tesla’s Q4 2025 results exceeded expectations, with full-year revenue and adjusted PATMI reaching 109% and 111% of forecasts respectively, driven by higher automotive gross margins. However, adjusted PATMI excluding stock-based compensation fell 16% due to delivery declines and higher operating expenses.
Q: How did vehicle deliveries perform in Q4 2025?
A: Tesla delivered 418,000 vehicles in Q4 2025, marking a 16% year-over-year decline—the company’s largest quarterly drop on record. This decline resulted from reduced demand following the removal of the US$7,500 EV tax credit.
Q: What is Phillip Securities Research’s recommendation for Tesla?
A: Phillip Securities Research maintains a SELL recommendation with a DCF target price of US$215, reduced from US$220 previously, citing multiple headwinds and steep valuations of approximately 360x PE for FY26.
Q: How did Tesla’s gross margins perform?
A: Gross margins improved significantly by 3.8 percentage points year-over-year to 20.1%, driven by higher vehicle average gross profit, growth in energy storage and services segments, and increased automotive ancillary sales including FSD subscriptions.
Q: What happened to Tesla’s market position in China?
A: Tesla lost market share in China, dropping to 5.7% in Q4 2025 from 7.2% in Q4 2024, while domestic China sales fell 2% year-over-year despite the overall Chinese EV market growing 16% during the same period.
Q: How did non-automotive segments perform?
A: Non-automotive revenue grew 22% year-over-year, comprising 29% of total revenue. Services revenue increased 18% year-over-year, while energy generation and storage revenue surged 25% year-over-year driven by record Megapack deployments.
Q: What are the key risks facing Tesla?
A: Tesla faces multiple headwinds including tariffs, loss of tax credits, declining market share in China, and the distant timeline for significant revenue contribution from autonomous driving, robotaxi, and robotics initiatives, which are expected to take more than five years to materialise.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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