Tesla, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Mission Update: Tesla updated its mission to 'amazing abundance', focusing on AI, robotics, universal high income, and environmental stewardship.
• Product Endings: Ending Model S and X production to convert Fremont factory space to Optimus robot production, aiming for a million Optimus units annually in the converted space.
• Autonomy and FSD: Making progress with paid rides in Austin with no safety monitor, expecting full autonomy in US cities by end of year. Potential for Tesla owners to participate in robotaxi fleet like Airbnb.
• Energy: Strong growth in energy gross profit, record revenue, and expected deployments with new products like MegaPack 3 and Mega Block.
• Optimus: Planning to unveil Optimus 3, ramping production in Fremont, with a new supply chain and general-purpose robot capable of learning from human behavior.
• CapEx: Significant CapEx year, over $20 billion planned for 2026, including factories, AI chips, and infrastructure to support growth in autonomy and robotics.

Segment Performance

• Autos: Automotive margins excluding credits improved sequentially from 15.4% to 17.9% in Q4 2025. Automotive gross profit was flat despite 16% lower deliveries, due to regional mix. FSD adoption reached nearly 1,100,000 paid customers globally, with nearly 70% upfront purchases, and transitioning to a subscription-based model.
• Energy: Achieved record gross profit for the quarter, ended the year with nearly $12.8 billion in revenue, a 26.6% year-over-year growth. Backlog remains strong, but expects margin compression from low-cost competition, policy uncertainty, and tariffs.
• Services and Others: Margin declined from 10.5% to 8.8% primarily due to higher employee-related costs, but supercharging margin improved. Robotaxi business-related costs are immaterial at this stage.

Guidance

• 2026 Focus: Ramping production at factories, addressing battery pack constraint. FSD subscription model impacts automotive margins. Energy backlog strong but expects margin compression due to competition and tariffs.
• Optimus: Expecting to reach million-unit production in Fremont for Optimus 3 by end of year.
• CyberCab: Planning to start production in April, expecting long-term CyberCab production to exceed other Tesla vehicles combined due to majority of miles traveled by one or two people.

Risks

• Geopolitical Risks: Potential constraints from chip supply and geopolitical issues, necessitating Tesla TerraFab to mitigate supply chain and geopolitical risks.
• Competition: China as tough competition in humanoid robots, with capabilities in AI and manufacturing.
• Regulatory Risks: City-by-city/state-by-state rollout for autonomy, potential policy uncertainty affecting energy margins.

Question and Answer

Q: Today there are approximately 90 million cars sold globally each year. Does Tesla have a view, based on its robotaxi ambition, what this number will be in five or ten years? And how does this impact Tesla's EV strategy to have more models?

A: Elon Musk and Lars Moravy discuss that autonomy will change the global market, with CyberCab designed for two-seater robo taxis, expecting production start in April, and long-term CyberCab production to exceed other vehicles combined due to majority of miles traveled by one or two people.

Q: Are there still plans to launch new models to address different price segments and vehicle types which could materially expand the TAM for Tesla?

A: Lars Moravy states Tesla is continuing to launch least expensive models globally, bringing down vehicle costs without sacrificing range/performance, and CyberCab aims to expand the premium ride experience to larger markets.

Q: What is the current bottleneck to increased Robotaxi deployment and personal use unsupervised FSD?

A: Ashok Elluswamy and Lars Moravy mention scaling issues like learning from safety monitors, fleet size scaling, and infrastructure needs, but progress being made with unsupervised service in Austin and leveraging Tesla's charging/service network.

Q: After the unveil of the Cybertruck, Elon stated that if it didn't sell well, Tesla would build a more conventional-looking pickup. How practical would it be to create this new design on the Cybertruck architecture, and could it be conveniently built on the existing production lines?

A: Lars Moravy responds that Cybertruck line is flexible, designed for autonomy, and can be adapted, with previous experience of building different models on same lines.

Q: Elon, you've been spending significant personal time on Tesla's chip design. What was the forcing function behind this increased involvement? Do you think external chip sales will represent a significant portion of Tesla's valuation by the end of the decade?

A: Elon Musk explains chip design is critical for AI5/6, sees chip supply as a potential growth limiter, and discusses need for Tesla TerraFab to mitigate geopolitical risks, with external chip sales not expected to be significant in the short term due to internal needs.