TLDR
- Tesla’s Q4 revenue dropped 3% year-over-year while earnings per share plunged 60%, sending shares down over 11% in the past month
- The company will discontinue Model S and Model X production next quarter as part of a pivot toward autonomous vehicles and robotics
- Full self-driving subscriptions hit 1.1 million active users with 38% year-over-year growth
- Cybercab production set to begin in April, with robotaxi service expanding to seven new cities in H1 2026
- Capital expenditures will exceed $20 billion in 2026, more than double the $8.5 billion spent in 2025
Tesla shares continued their slide Thursday, closing down 3.36% at $416.98 following the company’s fourth-quarter earnings report. The stock initially jumped after results were released but quickly reversed course as investors digested the mixed picture.
The quarter painted two very different stories. Revenue fell 3% from the prior year, while earnings per share tumbled 60%. Automotive revenue dropped 11% as total deliveries declined 16%.
CEO Elon Musk used the earnings call to make clear that Tesla is no longer primarily a car company. “We’re really moving into a future that is based on autonomy,” Musk said.
The company announced it will end production of the Model S and Model X vehicles starting next quarter. These were some of Tesla’s most iconic products, with the Model S launching in 2012 and putting the company on the map.
“It’s time to basically bring the Model S and X programs to an end with an honorable discharge,” Musk explained. “It’s part of our overall shift to an autonomous future.”
The New Focus: Software and Robotaxis
Tesla revealed it now has 1.1 million paying subscribers for its full self-driving software, up 38% from last year. This growth rate outpaced the company’s 22% growth in cumulative vehicle deliveries.
The company currently operates around 500 robotaxis in Austin and the San Francisco Bay Area. Tesla plans to expand this service to seven new cities during the first half of 2026.
Production of the Cybercab, a purpose-built autonomous vehicle without a steering wheel, is scheduled to start in April. The company has set aggressive expansion goals, planning to double its robotaxi fleet every month.
Analysts predict Tesla could surpass Waymo’s current fleet of 2,000 vehicles by April. Musk even suggested the Cybertruck production line could transition to building fully autonomous delivery trucks for local cargo transport.
The Robot Bet
Tesla plans to reveal the Optimus Gen 3 humanoid robot this quarter. Production is expected to begin before the end of 2026, with eventual capacity reaching 1 million robots annually.
Analyst Jed Dorsheimer from William Blair calculated that Optimus could generate $25 billion in revenue at 500,000 units per year with a $50,000 price tag. That compares to roughly $3 billion from Model S and X sales.
Free cash flow fell 30% year-over-year to $1.4 billion in the fourth quarter. This metric will likely stay under pressure throughout 2026 as Tesla invests heavily in AI infrastructure and manufacturing.
The company plans to spend over $20 billion on capital expenditures this year. That’s more than double the approximately $8.5 billion spent in 2025.
Tesla declined to provide guidance for vehicle deliveries in 2026. Instead, the company said deliveries “will be impacted by aggregate demand for our products, supply chain readiness and allocation decisions between sale to customers or use for our owned and operated fleet.”
Energy storage deployment reached 14.2 gigawatt-hours in Q4, up 29% year-over-year. The stock trades at a price-to-earnings ratio of about 389.
Wedbush analyst Dan Ives maintains his bullish stance, stating Tesla could reach a $2 trillion market cap in early 2026 and $3 trillion by year-end in a bull case scenario.
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