Tesla (TSLA) stock came under pressure Thursday after it posted an earnings and revenue miss in the second quarter and CEO Elon Musk hinted at a "few rough quarters" amid mounting challenges for the automaker.
Tesla reported second quarter revenue of $22.50 billion vs. $22.64 billion expected (per Bloomberg consensus), a 12% drop compared with the $25.05 billion reported a year ago. Tesla posted adjusted earnings per share of $0.40 vs $0.42, with operating income coming in at $923 million vs. $1.23 billion expected.
Tesla's revenue from the sale of regulatory credits fell to $439 million from $890 million a year earlier, and will continue to drop following passage of the One Big Beautiful Bill Act (OBBB), the company said. Musk spent months blasting the bill, but Trump signed it into law earlier this month.
Tesla stock closed down 8.2% on Thursday.
CFO Vaibhav Taneja said on the earnings call that the OBBB would affect Tesla’s business, leading to a "pull forward" in sales ahead of the $7,500 tax credit expiring at the end of Q3.
“Given the abrupt change, we have limited supply of vehicles in the US this quarter,” Taneja said. “We may not be able to guarantee delivery orders placed in the later part of August and beyond.”
Musk chimed in when asked about the impact of the loss of the federal tax credit on Tesla's business. He said Tesla “probably could have a few rough quarters” ahead following expiration of the credit, adding, “I am not saying that we will, but we could."
Tesla said its first builds of a more affordable model occurred in June, with volume production planned for the second half of 2025. The company also said its purpose-built robotaxi was still scheduled for volume production starting in 2026.
Taneja noted that Tesla would only ramp up volume production of the upcoming "affordable" model once the EV tax credit expired.
"We are entering a vulnerable time for Tesla, as near-term headwinds, like auto and energy demand, subsidy cuts, and tariffs, pressure financials in the crucial transition to the long-term vision of real-world AI and higher-margin products like robotaxi and optimus," William Blair analyst Jed Dorsheimer wrote in a note to clients following Tesla's earnings release.
Tesla has expanded its robotaxi testing in Austin, Texas, with a bigger operating area and likely more vehicles coming.
Earlier, Musk said the company would expand testing to the San Francisco Bay Area, but reports suggest the applications for those state permits have not been submitted. Separately, Bloomberg reported on Wednesday that Tesla was in talks with Nevada officials to test the company's robotaxi service.
Tesla said in its release that the service would expand, eventually without a safety rider in every vehicle, and that testing would be conducted in additional US cities.
Musk said on the call that he expects half of the US population to be covered by Tesla robotaxi service by the end of next year, though he cautioned that he tends to be overly optimistic with his predictions.
Tesla's second quarter earnings report comes at a time when the S&P 500 (^GSPC) and Nasdaq (^IXIC) are surging to new highs, bucking Trump's tariff war that led to broad-based selling and fears of a global economic slowdown.
Musk's reputational hit stemming from his political activities, the rise of more competition, and US consumer preferences for vehicles like hybrids have Tesla and the EV industry as a whole worried. For Tesla in particular, weakness in key regions like Europe has been an ongoing issue, and the latest registration data shows US sales sliding as well.
This resulted in Tesla delivering only 384,122 vehicles globally in Q2, a 13.5% drop year over year. The changeover to the refreshed Model Y may have blunted sales. But the question for management is the availability picture for that new Model Y in Tesla's main selling regions.
Despite the rough quarter and challenges ahead, some analysts like TD Cowen's Itay Michaeli are bullish.
"While there's no shortage of challenges this year (IRA, tariffs, competition, regulatory credits), the list of potentially game-changing level catalysts spanning AV, EV and robotics tilt the risk/reward favorably with the stock pulling back from recent highs and amid prevailing negative sentiment," Michaeli said, maintaining his Buy rating and $374 price target.