Tesla to End Model S and X Production, Restructures Business Around AI and Robots (Comprehensive)

Plans to Invest Over $20 Billion in Capital Expenditures This Year
Fourth Quarter Results Exceed Market Expectations...
Annual Revenue Declines

Tesla posted fourth-quarter results last year that exceeded market expectations, but for the first time on an annual basis, the company saw a decline in revenue. Despite the drop in earnings, Tesla plans to invest more than $20 billion in capital expenditures (Capex) this year. Even as the electric vehicle market slows, the company aims to secure new growth drivers by focusing on emerging businesses such as artificial intelligence (AI) and humanoid robots.

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According to Tesla’s fourth-quarter 2025 earnings report released on the 28th (local time), revenue reached $24.9 billion and earnings per share (EPS) stood at $0.50. These figures represent a decrease of 3% and 17%, respectively, compared to the same period last year. This is higher than market expectations. The average Wall Street forecast compiled by financial data provider LSEG was revenue of $24.79 billion and EPS of $0.45.

Operating profit was $1.4 billion, down 11% year-on-year, while net income (on a GAAP basis) was $840 million, a 61% decrease. The operating margin fell by 0.5 percentage points to 5.7% compared to the same period last year.

By segment, automotive revenue was $17.7 billion, down 11% from the previous year. In contrast, revenue from the energy generation and storage segment increased 25% to $3.8 billion. Service and other revenue also rose 18% to $3.4 billion.

The annual decline in revenue was even more pronounced. Tesla’s total annual revenue last year was $94.8 billion, a 3% decrease from the previous year. Of this, automotive revenue fell 10% to $69.5 billion.

In addition, Tesla announced that on the 16th, it signed a contract to invest approximately $2 billion in xAI, the artificial intelligence (AI) startup founded by CEO Elon Musk. The related procedures are expected to be completed in the first quarter of this year. Regarding this investment, the company stated, "We are creating products and services that bring AI into the physical world," and explained, "The goal of this investment is to enhance our capabilities for large-scale development and application of AI products and services in the physical world."

Musk explained that Grok, xAI’s AI, could help manage Tesla’s autonomous vehicles and the humanoid robot Optimus, likening it to a "conductor of an orchestra."

Tesla plans to phase out production of the Model S and Model X, converting the production space to manufacture Optimus. Musk described this as an "honorable retirement." He stated that by securing production lines, the company aims to achieve an annual production capacity of 1 million Optimus units.

Tesla plans to invest more than $20 billion in capital expenditures this year, more than double last year’s Capex of approximately $8.5 billion. The company will establish a total of six new production lines, including those for the fully autonomous robotaxi Cybercab, Optimus, and energy storage and battery manufacturing. Funds will also be allocated to investments in AI computing infrastructure and the expansion of existing factory production capacity.

Vaibhav Taneja, Tesla’s Chief Financial Officer (CFO), stated, "The scale of investment may seem somewhat excessive, but we believe this is the right strategy to prepare the company for the next era."

This content was produced with the assistance of AI translation services.