ar
Tesla (NASDAQ:TSLA) will report its Q2 earnings on Wednesday, July 23 after the closing bell, with expectations of weak earnings due to a challenging quarter.
The EV giant is struggling with a double digit decline in revenue and EPS, driven by slowing EV adoption, declining sales in key regions and rising competition.
As Tesla struggles with an outdated vehicle lineup, along with the CEO Elon Musk’s polarizing public image, Tesla is bracing for disappointing earnings results.
Wall Street Estimates
- Earnings Per Share (EPS): $0.40 per share, a decrease of 23% YoY
- Revenue: $22.4 billion, a decrease of 11% YoY
Tesla missed estimates in the last earnings call. In the trailing four quarters, Tesla has missed estimates three times and beat once. ⁽¹⁾
Along with earnings, investors will be looking for updates about the robotaxi service, including how fast it can expand and when safety monitors will be allowed to leave the vehicle.
They will also be looking for an update about a lower-priced Tesla model promised for later in 2025. No one has seen the car yet, and investors hope it can help mitigate Tesla’s sales decline.
Sales Decline and Challenges
Tesla delivered 384,000 vehicles globally in Q2, a 13.5% YoY decline, which indicates the sharpest drop in Tesla’s history and its second consecutive quarter of declining deliveries. This includes 373,728 Models 3 and Y units and 10,394 other models, coming up short of estimates of 420,079 units. ⁽²⁾
This decline was mainly driven by Europe, where sales fell by 28% in May. Tesla’s market share in China declined from 10% to 5% over the past 5 years. Rising competition, especially from its main rival BYD, has reported battery EV sales of 606,993, up 42.5% YoY, outperforming Tesla. ⁽³⁾
The EV industry has continued to grow, but Tesla has stayed lagging behind and losing ground due to an aging vehicle lineup and lack of new updates on its vehicle models. Automotive revenues are expected to drop more than 6% in Q2.
Tesla’s production has exceeded its sales figures, which signals a slowdown in demand, further compounded by rising competition and trade policy risks, especially tariffs in the EU and China. ⁽⁴⁾
Financial Pressures and EV Credit Loss
Telsa’s Q2 revenue is expected to drop, alongside its EPS. High operating and capital expenses are weighing on Tesla’s profits and cash flow as the EV maker is investing in expanding its gigafactory output, battery cell production, its Supercharger network, AI initiatives and product development.
The loss of EV credits resulting from President Trump’s “Big Beautiful Bill” also caused major damage to Tesla. The EV maker generated $2.8 billion from its tax credits in 2024, which represented 39% of its $7.1 billion net income. The loss of these credits could hurt Tesla’s income, despite multi-year credit agreements. ⁽⁵⁾
Energy Storage and Services
Tesla’s energy generation and storage segment remains positive, with 9.6G GWh of energy storage released in Q2. Segment revenues are expected to come in at $3 billion, showing growth.
Services and other segments’ revenues are expected to report $3.15 billion, up 20% YoY. These segments represent a small role in Tesla’s total revenue, which could unlikely reduce the automotive business’s weak performance. ⁽⁶⁾
Robotaxi Rollout and Full Self Driving
Markets are waiting for updates from Tesla CEO Elon Musk on the company’s Robotaxi launch and Full Self Driving (FSD) technology during the earnings call.
Tesla launched a limited robotaxi service in Austin, Texas on June 22 which used a small number of Model Y vehicles with unsupervised FSD. Issues emerging from traffic violations have raised concerns. Competitors like Waymo and Baidu are ahead in autonomous driving, leaving Tesla’s robotaxi ambitions behind. ⁽⁷⁾
Public Image and Political Controversy
Tesla CEO Elon Musk’s public image has also impacted Tesla’ brand. His recent political campaigns, especially supporting right-wing parties in Europe and the launch of his own political party “America Party” have reduced customers and investors.
This follows his exit from DOGE and public clash with US President Trump.
European sales declines were also caused by Musk’s statements. Investors are concerned that Musk’s focus on politics could hurt Tesla’s core business, which could add more volatility to the stock, which is already down 15-20% YTD.
Looking Ahead
Investors will be focused on Musk’s commentary during the earnings call, particularly on robotaxis, Full Self Driving (FSD), new product timelines, and strategies to address declining demand. With competition rising and Musk’s political campaigns creating headwinds, Tesla faces a pivotal moment. Investors should approach the report cautiously, prepared for near-term challenges and the possibility of more stock volatility.
