Tesla earnings (Dec '25 qtr)

January 29, 2026

On the metrics, Tesla reported a pretty good quarter.  Total revenues were about inline with street estimates.  As has been the trend, revenues fell (-3% y/y), as the drop in the auto revenue (-11%) was partially offset by  growth in the battery and services businesses.  The battery business grew 25%, and services grew 18%. However, the pleasant surprise this quarter was the gross margins.  Gross margin improved meaningfully. And on an LTM basis, the gross margin improved y/y for the first time since 2022.

However, opex continues rising, as the company is investing heavily in new technology for robotaxi and autopilot and other.  So operating profit continued to fall.  But Tesla’s current valuation is not super reliant on these profit metrics.  It’s now a bet on the future.

The “AI related” businesses – self-driving, robotaxi, and robotics – are key to the future of the company.  And the stock expects big things from them in the years to come.  

In Morgan Stanley’s recent “sum of the parts” model, the traditional car business contributes only 13% to the total target price.  The remaining 87% is from batteries, self-driving, and robotics.

TSLA trades well above 200x earnings.  So it’s hard to gauge the valuation of the stock using traditional methods.  The key drivers here will be new announcements and stepping stones in the AI-related businesses.  

It’s also worth noting that we’re now in an election year.  And the stock historically has done better when Elon says that he’s focused on the business and not politics.  So that might be another variable for the coming year to watch for the stock.