Tesla reports first annual sales drop on record but Q4 turns out better-than-feared

Elon Musk's Tesla Inc. reported results for the fourth quarter of 2025 that were better than expectations. However, that did not prevent the company from reporting its first-ever decline in annual sales. The stock fluctuated in afterhours trading.

For the fourth quarter, Tesla reported sales of $24.9 billion, marginally higher than the $24.79 billion expected. Earnings Per Share (EPS) for the quarter stood at $0.5 versus the $0.45 expectation. Quarterly revenue was also down 3% from last year.

Decrease in vehicle deliveries and lower regulatory credit revenue pushed Tesla's annual sales down to $94.8 billion from $97.7 billion in 2024. Vehicle deliveries were down 8.6% for the full year and 16% in the fourth quarter.

Operating expenses were up 39% from the same quarter last year driven by AI and other R&D-related expenditures. That dragged Tesla's net profit for the quarter down by 61%.

As Tesla's core business struggles due to competition from other EV makers, particularly from BYD, CEO Elon Musk has been focusing on other activities, such as the Robotaxi business and the Optimus Humanoid robot. The Robotaxi pilot was launched last year and Tesla plans to expand its coverage to seven additional cities in the first half of the year, including Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas.

Tesla will also be investing $2 billion in Elon Musk's AI-startup xAI as part of its latest financing round, which also saw participation from Nvidia and Cisco.

Musk also highlighted during the company's earnings call that Tesla will be ending the production of its Models S and X and will be converting the Fremont factory lines to produce the Optimus robots. The models that will be discontinued are insignificant to the company's overall volumes as their more popular models 3 and Y, comprised of 97% of overall deliveries.

Shares of Tesla currently trade 2% higher in extended trading at $439.