Tesla Inc. disclosed a significant 61% decline in fourth-quarter profits, reporting $840 million compared to $2.1 billion a year earlier, as the electric vehicle giant confronts declining sales and substantial investments in artificial intelligence technologies. The earnings report released Wednesday revealed revenues of $24.9 billion, representing a 3.1% decrease year-over-year.
The financial downturn follows earlier warnings of delivery reductions and reflects multiple challenges including increased restructuring costs, heightened research and development expenditures for AI initiatives, and revenue declines from emission tax credits following policy reversals during Donald Trump’s administration. Tesla’s 2025 auto sales fell by 9%, attributed to intensified market competition and consumer reactions to CEO Elon Musk’s political engagements.
During an earnings conference call, Musk outlined an ambitious technological transformation, announcing plans to phase out production of Models S and X luxury vehicles while converting Fremont, California plant capacity for humanoid robot manufacturing. The company confirmed a massive capital expenditure budget exceeding $20 billion for 2026, more than double last year’s $8.5 billion investment.
Musk’s technological optimism was prominently displayed at the World Economic Forum in Davos, where he declared self-driving technology ‘essentially a solved problem’ and predicted widespread robotaxi deployment across the United States by late 2026. However, analysts remain cautious about Tesla’s execution capabilities given previous unfulfilled promises regarding autonomous driving timelines.
The earnings release included disclosure of a $2 billion investment agreement with Musk’s xAI artificial intelligence venture, signed January 16, with anticipated closure in the first quarter. Despite financial challenges, Tesla shares gained 1.7% in after-hours trading, reflecting investor confidence in the company’s long-term AI transformation strategy.