The electric vehicle giant Tesla reported its first-quarter earnings yesterday, falling short of already lowered Wall Street expectations. The company posted revenue of $21.3 billion, down 8% year-over-year, while deliveries declined to 358,000 vehicles. This marks the third consecutive quarter of year-over-year sales declines for the EV pioneer.
Tesla’s net income came in at $1.1 billion, representing a 42% drop compared to the same period last year. Earnings per share reached $0.41, significantly below analyst consensus estimates of $0.63. The financial underperformance confirms growing concerns about Tesla’s market position amid intensifying global competition and moderating EV demand growth.
CEO Elon Musk struck a defensive tone during the earnings call, blaming “unprecedented interest rate environments” and “temporary EV adoption plateaus” for the company’s struggles. “We’re going through a between-S-curves moment,” Musk explained, referencing his theory that technological adoption follows S-curve patterns with occasional plateaus. “The demand elasticity for EVs remains strong but requires price recalibration.”
The quarter saw Tesla’s automotive gross margin shrink to 16.4%, its lowest level since 2019. This margin compression reflects aggressive price cuts implemented across Tesla’s lineup to stimulate demand. The Model Y, Tesla’s best-selling vehicle, now starts at $39,990 in the U.S., representing a 25% price reduction from its peak in early 2023.
Investors appeared unimpressed with the results, sending Tesla shares down 8.7% in after-hours trading. The stock has already declined 23% year-to-date prior to the earnings release. Dan Ives of Wedbush Securities called the quarter “disappointing even against lowered expectations” in a note to investors. “The demand picture remains cloudy, and margin compression continues to be the elephant in the room,” Ives wrote.
The earnings report highlighted Tesla’s cash position of $26.8 billion, down from $29.1 billion at the end of 2024. Free cash flow turned negative at -$243 million, raising questions about the company’s capacity to fund ambitious growth initiatives while maintaining profitability. CFO Vaibhav Taneja attributed the cash burn to “continued investments in AI and next-generation platforms.”
Energy storage remains a bright spot in Tesla’s business mix. The division posted revenue of $2.1 billion, up 37% year-over-year, with deployments of Powerwall home batteries and utility-scale Megapack systems reaching 12.5 GWh. “Our energy business continues to scale beautifully,” Musk noted, though it still represents less than 10% of total revenue.
Production challenges plagued Tesla’s newer models during the quarter. The Cybertruck saw just 12,300 deliveries, well below initial projections of 20,000 quarterly units by mid-2025. Musk acknowledged manufacturing difficulties with the vehicle’s stainless steel exterior but insisted that production rates would “increase dramatically by year-end.”
International markets presented a mixed picture for Tesla. European deliveries fell 17% year-over-year as local competitors gained ground. China saw a modest 4% growth in deliveries despite price cuts, with BYD continuing to outsell Tesla in the world’s largest EV market. “The competitive intensity in China is unlike anything we’ve seen,” admitted Drew Baglino, Tesla’s Senior VP of Powertrain and Energy Engineering.
The autonomous driving business provided some optimism amid disappointing financials. Tesla reported that 85,000 customers are now using its Full Self-Driving (FSD) software on a subscription basis, generating recurring revenue. Musk boldly predicted that Tesla would demonstrate “true unsupervised autonomy by the end of 2025,” though regulatory approval timelines remain uncertain.
