---
title: "Earnings Preview | Automotive business under pressure, will Tesla's high valuation be supported by the narrative of \"AI and energy\"?"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/273671231.md"
description: "Tesla will announce its latest quarterly results on Thursday morning Beijing time. The company set a record in the third quarter with deliveries reaching 497,099 vehicles and revenue of $28.1 billion, a year-on-year increase of 12%. However, operating expenses surged 50% year-on-year, leading to a contraction in operating profit margin to 5.8%, and earnings per share fell 31% to $0.50, below market expectations. Despite facing demand challenges, Tesla's energy division performed outstandingly, with significant capital expenditure expected to increase in 2026, primarily for artificial intelligence infrastructure"
datetime: "2026-01-26T08:26:34.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/273671231.md)
  - [en](https://longbridge.com/en/news/273671231.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/273671231.md)
---

> Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/273671231.md) | [繁體中文](https://longbridge.com/zh-HK/news/273671231.md)


# Earnings Preview | Automotive business under pressure, will Tesla's high valuation be supported by the narrative of "AI and energy"?

According to Zhitong Finance APP, Tesla (TSLA.US) will announce its latest quarterly results on Thursday morning Beijing time (after the US stock market closes on Wednesday). The company continues to spark intense debate and remains one of the most controversial and closely watched stocks in the market. Investors have almost no middle ground in their views on Tesla. They are either extremely bullish or extremely bearish, with some expecting a significant drop in stock price while others anticipate substantial returns.

There are many questions surrounding Tesla. Is it primarily an automotive company? Or a technology company? How much potential does it have in the Full Self-Driving (FSD) field? Will it become a market leader or just one of many competitors? What about its valuation? Some believe the company's valuation is too high, especially if viewed as an automotive company.

Since bottoming out in April 2025, Tesla's stock price has been on a strong upward trend. Before the recent pullback, its stock price had risen over 100%.

## Performance Review: Third Quarter Revenue Hits Record High, But Rising Costs Dampen Its Shine

Tesla's third-quarter performance reached a record high, with deliveries of 497,099 vehicles and revenue of $28.1 billion, a year-on-year increase of 12%. However, the strong delivery numbers masked potential demand challenges: it is estimated that at least 50,000 units were sold in the fourth quarter before the expiration of the US federal electric vehicle tax credit policy on September 30, as consumers rushed to purchase.

Due to increased sales promotions and R&D project expenditures in the third quarter, operating expenses surged 50% year-on-year to $3.4 billion, and operating profit margin shrank to 5.8%. Earnings per share (EPS) fell 31% year-on-year to $0.50, below market expectations.

The company's energy storage division performed particularly well, with installed capacity reaching a record 12.5 GWh, an 81% year-on-year increase. This division generated $3.4 billion in revenue and $1.1 billion in gross profit, significantly outperforming the automotive division.

The company expects capital expenditures in 2026 to increase significantly from approximately $9 billion in 2025, primarily for artificial intelligence infrastructure, including the Optimus robot project. Despite the increased spending, Tesla still generated approximately $4 billion in record free cash flow in the third quarter, bringing its total cash and investments to over $41 billion, providing ample financial flexibility for its AI development.

## What Aspects Should Be Focused on in the Fourth Quarter Earnings Call?

**Fourth Quarter Delivery Data Shows Slowing Growth Momentum**

Weak delivery numbers may put pressure on Tesla's automotive business revenue and profit margins. However, the company's energy generation and storage business is expected to offset some of this adverse impact. Thanks to strong market performance of Megapack and Powerwall products, Tesla's energy business is performing well.

Tesla's fourth-quarter delivery volume is expected to be 418,227 vehicles, a year-on-year decrease of 15.6%, falling short of analyst expectations. The total delivery volume for the fiscal year 2025 is projected to be 1.636 million units, an 8.6% decline from 2024, marking the company's second consecutive year of declining sales. Chinese competitor BYD has surpassed Tesla to become the world's largest manufacturer of pure electric vehicles, with expected deliveries of 2.26 million units in 2025 Energy storage is one of the few highlights, with a deployment of 14.2 GWh in the fourth quarter, setting a new record. For the entire year, Tesla deployed a total of 46.7 GWh (a year-on-year increase of 49%), making energy an increasingly important profit driver for Tesla. Analysts generally believe that revenue from the "energy production and storage" business will reach $3.66 billion, a 19.7% increase compared to the same period last year.

Analysts widely expect that, given the decline in delivery volumes, the company's revenue will shrink. Intensifying competition is also putting significant pressure on profit margins, which is expected to lead to further declines in profitability.

![3e6f1556c68b12d00faa0fd45517dd2e.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260126/1769414972146378.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

The following are forecasts made by analysts based on LSEG data:

Q4 2025 revenue: $24.78 billion (a year-on-year decrease of 3.6%)

FY 2025 revenue: $94.96 billion (a year-on-year decrease of 2.8%)

Q4 2025 non-GAAP earnings per share: $0.44 (a year-on-year decrease of 39.4%)

FY 2025 non-GAAP earnings per share: $1.63 (a year-on-year decrease of 32.8%)

Q4 2025 operating profit margin: 4.58% (a year-on-year decrease of 368 basis points)

FY 2025 operating profit margin: 5.21% (a year-on-year decrease of 408 basis points)

**Regional Performance and Strategic Positioning**

The European market poses the biggest challenge for Tesla. According to Electrek, Tesla's sales in Europe are expected to decline by 27.8% to 235,322 vehicles in 2025. Management's comments on European demand trends and the impact of CEO Elon Musk's political activities will be closely monitored. In China, despite Tesla's established local production capabilities, its market share continues to decline amid intensifying competition from local manufacturers. Analysts predict that "automotive sales revenue" will reach $17.97 billion, indicating a year-on-year decrease of 3.7%.

**Profitability Trajectory and Margin Outlook**

Due to the dual pressure of price competition and declining production on the automotive business's gross margin, investors will focus on whether the energy business can offset the weakness in the automotive sector. With the cancellation of penalties for emissions standard violations, regulatory credit revenue is expected to continue to decline, as this historically high-margin revenue source will no longer exist.

**FSD Monetization Progress**

Last year, Full Self-Driving (FSD) technology was launched in Australia and New Zealand, with plans to roll it out in China and Europe, pending regulatory approval. Musk recently announced that FSD will switch to a subscription model after February 14, with new users required to pay a monthly subscription fee of $99 instead of the previous one-time payment of $8,000. This move aligns with Musk's goal of achieving 10 million active FSD subscription users set in his $1 trillion compensation plan. Currently, FSD's penetration rate in the fleet is only 12%, indicating significant potential for FSD to develop into a larger revenue source in the future **New Product Roadmap**

In the robotaxi project, Tesla has launched limited services in Austin and the San Francisco Bay Area, but the operational scale is far below initial expectations, with only about 200 vehicles currently in use. Tesla has also failed to achieve its goal of launching fully autonomous taxis to the public by the end of 2025. Investors are eager to understand Tesla's latest progress in achieving Full Self-Driving (FSD), expanding services to the planned eight to ten cities, and the production timeline for Cybercab (currently scheduled to begin production in the second quarter of 2026).

The Optimus humanoid robot has become a crucial component of Tesla's future development blueprint. Musk compared it to an "infinite funding loophole" during the third-quarter earnings call, suggesting it has the potential to address global poverty issues. His compensation plan requires the deployment of one million Optimus robots, but the mass production timeline has been pushed back from early 2026 to the end of 2026. Investors will closely monitor production readiness, commercialization strategies, and feasible deployment plans.

Additionally, a clear positioning of the next-generation affordable models, aside from the lower-priced versions of Model 3 and Model Y, remains critical for competing with Chinese manufacturers.

## Analysts Cautious About Overvaluation

The slowdown in Tesla's delivery pace highlights the increasing pressure facing its core electric vehicle business. The lackluster delivery volume in the fourth quarter has led to a second consecutive year of downward revisions to Tesla's sales forecast for 2025. Notably, the decline in sales for 2025 has also further widened. In 2024, Tesla's delivery volume decreased by 1% year-on-year. In 2025, the year-on-year decline exceeds 8%. Factors such as a sluggish overall electric vehicle market, intense competition, and an aging product line have adversely affected Tesla's sales.

As a result, CEO Elon Musk is shifting focus to autonomous vehicles and artificial intelligence, viewing them as the driving force for the company's future development. However, it will take years for these projects to generate substantial returns. Currently, given Waymo's leading position in the autonomous taxi field, Tesla has a long way to catch up. Transitioning autonomous taxis from pilot projects to mass production and converting AI-driven projects into stable revenue sources will require time. For now, Tesla is a high-risk, high-reward stock.

![ef3c097c130bc87c1880ba385c56d6d8.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260126/1769414667924158.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

Tesla's current price-to-earnings ratio is as high as 201. The average target price set by Wall Street analysts is $389, indicating a potential downside of 13.4% from Friday's closing level. Valuation concerns are also reflected in analyst ratings, with 30 out of 51 analysts recommending "hold" or "sell." **Technical analysis shows a bearish pattern**

Tesla's stock price has seen little net growth over the past year after a significant drop in April followed by a sharp rebound. The upward trend formed since April provides support, but the stock price is currently approaching a potential downward range. Momentum indicators reinforce this bearish pattern; the RSI has fallen to around 37, while the negative MACD divergence indicates that as the stock price gradually loses support from the 100-day moving average (MA), downward momentum is accelerating.

![87ee19da69596f4de6ca0d7df9595c73.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260126/1769414681405047.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

If the earnings report is disappointing, the stock price may drop to the next support level, around $383. Conversely, if the earnings report exceeds expectations, the stock price may rise to $452, where there is resistance from the 20-day moving average

### Related Stocks

- [Leverage Shares 2X Long TSLA Daily ETF (TSLG.US)](https://longbridge.com/en/quote/TSLG.US.md)
- [GraniteShares 1.25x Long Tsla Daily ETF (TSL.US)](https://longbridge.com/en/quote/TSL.US.md)
- [Simplify Volt TSLA Revolution ETF (TESL.US)](https://longbridge.com/en/quote/TESL.US.md)
- [Direxion Daily TSLA Bull 2X Shares (TSLL.US)](https://longbridge.com/en/quote/TSLL.US.md)
- [Tesla, Inc. (TSLA.US)](https://longbridge.com/en/quote/TSLA.US.md)
- [GraniteShares 2x Long TSLA Daily ETF (TSLR.US)](https://longbridge.com/en/quote/TSLR.US.md)
- [T-REX 2X Long Tesla Daily Target ETF (TSLT.US)](https://longbridge.com/en/quote/TSLT.US.md)
- [GraniteShares 2x Short TSLA Daily ETF (TSDD.US)](https://longbridge.com/en/quote/TSDD.US.md)
- [Tradr 2X Short TSLA Daily ETF (TSLQ.US)](https://longbridge.com/en/quote/TSLQ.US.md)
- [XI2CSOPTSLA-U (09366.HK)](https://longbridge.com/en/quote/09366.HK.md)
- [XL2CSOPTSLA (07766.HK)](https://longbridge.com/en/quote/07766.HK.md)
- [XI2CSOPTSLA (07366.HK)](https://longbridge.com/en/quote/07366.HK.md)

## Related News & Research

- [Tesla's First Quarter EV Sales: Analysts Project Modest Gains](https://longbridge.com/en/news/281225239.md)
- [Tesla, Inc. $TSLA Shares Sold by BTC Capital Management Inc.](https://longbridge.com/en/news/281321406.md)
- [The Tesla Model S And Model X Are Officially Dead](https://longbridge.com/en/news/281317969.md)
- [Tesla’s sales recover slightly, but the trend lines are all bad](https://longbridge.com/en/news/281541012.md)
- [Tesla first-quarter deliveries are coming. What it means for the stock.](https://longbridge.com/en/news/281359346.md)