Hit by BYD into negative growth, Tesla invests $2 billion in xAI. Is it accelerating its bet on the future?

On January 28th local time, Tesla released its financial report for the fourth quarter and the full - year of 2025. The data shows that the company achieved a revenue of $24.9 billion in the fourth quarter, a slight year - on - year decrease of 3%, slightly exceeding market expectations; the adjusted earnings per share was $0.5, exceeding analysts' expectations.

However, beneath the glamorous surface, there are hidden concerns: the revenue of the core automotive business declined by 11% year - on - year to $17.7 billion, and the quarterly net profit shrank significantly by 61%, recording only $840 million.

Tesla's Q4 2025 performance

What's more noteworthy is the full - year performance: Tesla's total revenue in 2025 was $94.8 billion, a 3% year - on - year decrease. This is the company's first annual revenue decline in history. The annual vehicle delivery volume decreased by 8.6% year - on - year to 1.64 million units, ending the multi - year growth record.

Tesla's full - year 2025 performance

Despite the first - ever revenue decline in history and a plunge in net profit, after the release of the financial report, Tesla's stock price rose by more than 3% in after - hours trading. Investors seem to be more concerned about the company's long - term vision, namely the AI future centered around Full Self - Driving (FSD), Robotaxi, and humanoid robots.

Tesla also announced that it will invest $2 billion in xAI, an AI startup under Elon Musk, to further strengthen its technological narrative.

01. Automotive Business: The Growth Engine Faces Challenges

Tesla's automotive business is going through the pain of transformation.

In the fourth quarter, the revenue of this segment decreased by 11% year - on - year, becoming the main factor dragging down the overall revenue. Looking at the full year, the automotive business revenue was $69.5 billion, a 10% decrease compared to 2024. Its proportion in the total revenue has dropped from the high of 88% in 2021 to about 73%.

In the fourth quarter, Tesla delivered 418,000 vehicles globally, a 16% year - on - year decrease; the cumulative annual delivery volume was 1.64 million units, a 8.6% year - on - year decrease, marking the first annual negative growth. This change reflects the profound transformation of the market competition environment.

Tesla's Q4 2025 vehicle production and delivery data

Tesla admitted in the financial report that the company is facing fierce competition in the global market, "especially the impact from BYD in China."

At the same time, the expiration of the US federal electric vehicle tax credit policy at the end of September last year also had a negative impact on sales.

Facing the pressure, Tesla has adjusted its pricing strategy.

The standard versions of Model 3 and Model Y launched in October 2025 have a starting price of $37,000. However, this measure has limited effect in boosting sales and has instead squeezed the profit margin.

Analysis by Barclays Bank shows that Tesla's pre - tax profit margin in 2025 was about 6%, less than half of Toyota's. Tesla itself also pointed out that the reduction of fixed - cost allocation for some models and the increase in tariffs have led to an increase in the average cost per vehicle.

Meanwhile, the slowdown of Tesla's product update rhythm is also a potential concern. Except for the Cybertruck launched in 2023, the main models Model 3 and Y have been on the market for many years. Facing the rapid progress of competitors in terms of charging speed and cruising range, the competitiveness of the existing product line is being tested.

As the company's basic business, how to revitalize the growth momentum of the automotive business has become a real challenge that Tesla must face.

02. Autopilot Business: The Gap Between Vision and Reality

The commercialization of FSD has advanced steadily this quarter. The monthly subscription volume of FSD doubled in 2025, and the user base reached about 1.1 million by the end of the year. Tesla has launched user test rides in multiple European markets and continues to seek regulatory approvals in China and Europe.

Notably, Tesla has started to gradually cancel the one - time payment option and fully shift to the monthly subscription model, aiming to establish a more sustainable software revenue system.

Meanwhile, the implementation of Robotaxi has made initial progress.

Tesla revealed that it launched driverless tests in Austin in December last year and removed safety drivers in a limited scope starting from January this year. The service expansion plan shows that the business will be promoted in seven US cities such as Dallas and Houston in the first half of 2026. The production preparation work for the dedicated model Cybercab has also been launched, and the production capacity is expected to ramp up starting from April 2026.

These developments support Tesla's long - term valuation logic. Some investment institutions believe that the company's existing vehicle scale provides it with a unique advantage, and a large number of existing vehicles can be transformed into an autopilot service network through software updates.

However, the real challenges remain severe. Many commercialization schedules set by Elon Musk previously have not been achieved on schedule, and the financial report still does not provide a clear profit path. In contrast, competitors such as Waymo have carried out commercial operations in multiple cities.

More importantly, this future business is consuming a large amount of Tesla's current resources. This quarter's operating expenses soared by 39% year - on - year to $3.6 billion, with a considerable part invested in autopilot R & D. This directly led to an 11% year - on - year decrease in operating profit and a significant decline in net profit.

03. Robot Business: From Concept to Mass Production

The humanoid robot Optimus is moving from the R & D stage to industrialization.

The financial report reveals that the third - generation Optimus will be released in the first quarter of 2026, and this version is defined as "the first model designed for large - scale production." Tesla is building its first production line, with the goal of starting production by the end of 2026 and a long - term plan of an annual production capacity of 1 million units.

Elon Musk previously said that sales may start in 2027.

However, this business is still in the investment stage. The relevant R & D expenses are included in the significantly increased operating expenses, and key information such as the target market, pricing strategy, and profit model has not been specifically stated in the financial report.

04. Energy Business: A New Growth Pillar

The energy business has become a prominent highlight in this quarter's financial report.

The revenue of this segment in the fourth quarter was $3.84 billion, a 25% year - on - year increase; the full - year revenue was $12.77 billion, with an increase of 27%, making it an important growth engine.

The gross profit of the energy business in the fourth quarter reached a record high of $1.1 billion, breaking the record for the fifth consecutive quarter. This is mainly due to the increase in the deployment of energy storage products, especially the demand for the grid - scale energy storage system Megapack. The company plans to put the new - generation Megapack 3 into production at its Houston factory in 2026 to further consolidate its market position.

In 2025, Tesla participated in grid regulation through the Powerwall home energy storage network more than 89,000 times, covering more than 1 million devices. It is estimated that these virtual power plant activities saved users more than $1 billion in electricity bills.

05. Strategic Investment: Balancing Short - term Profits and Long - term Investment

The most prominent feature of Tesla's current - quarter financial report is the change in the cost structure. While the revenue decreased slightly by 3%, the operating expenses increased significantly year - on - year.

The full - year operating expenses in 2025 reached $12.7 billion, a 23% year - on - year increase. The funds are mainly invested in AI R & D, the construction of new production lines, and the expansion of global infrastructure. This clearly reflects the company's strategic choice: sacrificing short - term profits in exchange for long - term growth potential.

The management said in the financial report that the increase in expenses reflects the shift of resources to future fields such as autopilot and robots, and it is a "necessary investment for long - term growth."

Although the capital expenditure in the fourth quarter decreased year - on - year, the market expects that the total capital expenditure in 2026 will increase from $9.5 billion to $11 billion - for adding six new production lines and expanding the AI training computing power infrastructure.

Notably, Tesla also announced that it will invest $2 billion in xAI's financing round to further strengthen its layout in the AI field.

Adequate cash reserves provide a guarantee for the implementation of the strategy. According to the financial report, the total cash and investments at the end of the fourth quarter reached $44.1 billion, a sequential increase of $2.4 billion, mainly from the cash flow generated by business operations.

However, the impact of this investment model on the current performance is obvious. Tesla's annual operating profit margin has dropped from 16.8% in 2022 to 4.6%, and the net profit has declined significantly year - on - year.

The key issue lies in the time window. If the high - level investment cannot be transformed into considerable commercial achievements within a certain period, and if the core automotive business further declines in the fierce competition, the company will face double pressure.

Contributing translator Jin Lu also contributed to this article

This article is from Tencent Technology, author: Su Yang, editor: Xu Qingyang, reprinted by 36Kr with authorization.