<p>Throughout the artificial intelligence (AI) revolution, <strong>Tesla</strong> <span class="ticker-mention inline-flex items-center font-bold">(TSLA <span class="ml-1 text-red-900">3.02%</span>)</span> stock has experienced a number of pronounced peaks and valleys. Whether it's Elon Musk's foray into politics, an electric vehicle (EV) business in decline, or ongoing delays with the company's long-awaited robotaxi service, it's never boring over at Tesla.</p><p>Nevertheless, the stock has been resilient, and recent price action suggests investors are generally optimistic. One of the biggest catalysts fueling Tesla's enthusiasm is the company's humanoid robot, Optimus.</p><p>Let's dig into how Tesla plans to scale the Optimus business and assess how robotics could become the key to a compounding earnings profile in the long run.</p><div><img alt="Tesla's Optimus robot hand." width="880" height="528" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84NTYwNTUvdGVzbGEtYm90LWhhbmQtY2xvc2V1cC1hcnRpZmljaWFsLWludGVsbGlnZW5jZS1haS0yLnBuZyZ3PTM4NDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84NTYwNTUvdGVzbGEtYm90LWhhbmQtY2xvc2V1cC1hcnRpZmljaWFsLWludGVsbGlnZW5jZS1haS0yLnBuZyZ3PTM4NDA"/><p>Image source: Tesla.</p></div><h2>Tesla is trading cars for robots</h2><p>At the end of January, Tesla reported earnings for the fourth quarter and full year 2025. Musk notified investors that the company plans to pivot some of its manufacturing capacity in Fremont, California, to wind down production of the Model S and X vehicles.</p><div><div id="foolcom_sidebar_top_container"></div></div><p>As production comes to an end for these EV models, Tesla will transition part of Fremont into a space focused on Optimus in lieu of the Model S and X. </p><div></div><section><div><div><div><small><div>Expand</div></small></div><div><img alt="Tesla Stock Quote" width="64" height="64" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL1RTTEEucG5nJnc9MTI4?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL1RTTEEucG5nJnc9MTI4"/></div><div><h2>NASDAQ: TSLA</h2><div>Tesla</div></div></div><div><div><div>Today's Change</div><div>(-3.02%) $-12.42</div><div>Current Price</div><div>$399.40</div></div><div></div></div></div><div><div></div><div><h3>Key Data Points</h3><div><div>Market Cap</div><div>$1.5T</div><div>Day's Range</div><div>$394.05 - $407.70</div><div>52wk Range</div><div>$214.25 - $498.83</div><div>Volume</div><div>3.7M</div><div>Avg Vol</div><div>67M</div><div>Gross Margin</div><div>18.03%</div></div></div></div></section><h2>Understanding the high-margin robotics model</h2><p>You might not think that robotics offers robust profit margins, given that these devices require substantial capital outlays for research and development (R&amp;D) and capital expenditures (capex).</p><div><div id="in_line_article_pitch_container"></div></div><p>One way Tesla has built a profitable business is by integrating high-margin services into its core hardware products. Take the EV business. Broadly speaking, buying a car is a one-time purchase -- or at the very least, a nonrecurring purchase.</p><p>Tesla's vehicle business is supplemented by a services platform featuring the company's autonomous driving technology. In other words, if you want access to Tesla's Full Self-Driving (FSD) software, you need to sign up for a subscription. Wrapping a high-margin, recurring-revenue software service around the capital-intensive EV business has helped Tesla generate healthy gross margins and free cash flow.</p><p>Tesla will likely employ a similar playbook with Optimus. In addition to the one-time hardware sale of the robot itself, customers will pay a subscription fee alongside that allows Optimus to function, learn new tasks, and improve dexterity over time.</p><h2>The financial potential of Tesla Optimus</h2><p>Humanoid robots have the potential to add trillions of dollars of economic value by delivering unprecedented levels of efficiency to the labor force. But Tesla is far from the only company exploring humanoids.</p><p>Moreover, Musk indicated that initial production of Optimus Gen 3 is likely to begin only at the end of this year. This is all to say that Optimus won't materially impact Tesla's financial profile for several years.</p><p></p><p>TSLA EPS Diluted (TTM) data by YCharts</p><p>Here is where things get interesting: Wall Street forecasts Tesla's earnings to return to growth this year. By 2028, the company's earnings per share are expected to double. That may not seem like much, but the gap between Tesla's trailing-12-month EPS and its 2028 expected earnings implies significant growth ahead.</p><p>This profitability will not be driven solely by more EV sales. Rather, it appears that Wall Street anticipates Tesla successfully executing on its AI vision and beginning to scale Optimus in a material way over the next couple of years.</p><p>Should Tesla meet or exceed these expectations, the stock could be in a position to double as earnings growth compounds thanks to the company's dominance in the physical AI realm.</p><div id="article_pitch_container"></div><div id="promobox_container"></div>

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<p>Tesla's stock has shown resilience amid various challenges, with optimism fueled by the development of its humanoid robot, Optimus. The company plans to shift some manufacturing capacity from Model S and X vehicles to focus on Optimus, which is expected to generate recurring revenue through subscription services. While initial production of Optimus Gen 3 may not significantly impact finances for years, Wall Street forecasts a doubling of Tesla's earnings per share by 2028, driven by successful execution of its AI vision and scaling of the Optimus business.</p>

- Tesla's stock has experienced fluctuations due to various challenges, including executive decisions and production delays, yet recent trends indicate investor optimism driven by its humanoid robot, Optimus.  
- The company plans to shift manufacturing focus from the Model S and X to optimize production for Optimus, integrating a high-margin subscription model alongside hardware sales, similar to its vehicle business.  
- Wall Street projects that Tesla's earnings will grow significantly by 2028, driven not only by EV sales but also by successful scaling of its AI initiatives, potentially doubling the stock value.

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Why Tesla Stock Could Double as Optimus Reaches Human-Level Proficiency This Year