Tesla’s Q2 revenue dropped 12%. Elon Musk bets on Robotaxi and FSD to drive future growth amid mounting financial pressure.
As expected, Tesla’s Q2 earnings continued their year-over-year decline compared to the same period last year.
Here are the core figures:
- Revenue: $22.496 billion, down about 12% YoY.
- Gross profit: $3.878 billion, down 15% YoY.
- Net profit: $1.172 billion, down 16% YoY.
- Gross margin: 17.2%, lower than Q2 2023’s 18.0%.
- Free cash flow: $146 million, down from $664 million in Q1.
Though some quarter-over-quarter metrics improved, overall performance still fell short year-on-year.
Tesla is at one of its weakest points in years — both sales and public attention are facing challenges.
During the earnings call, Elon Musk acknowledged: “Yes, we may face a few tough quarters.” But he also expressed optimism: “In the next few years, the company will undergo a fundamental transformation… Tesla’s future will profoundly change the world.”
Tesla is now shifting focus toward expanding the scope and audience of Robotaxi, rather than pushing a low-cost model.
According to Musk, the impact of Robotaxi could be visible as soon as late 2025. In the meantime, Tesla must still advance on multiple fronts: current vehicle sales, the humanoid robot Optimus, and especially FSD (Full Self-Driving).
Robotaxi: The Real Bet
Musk continued his tradition of announcing timelines for new features and products.
He said: “My guess is that it (Robotaxi) will have a meaningful financial impact by the end of next year.”
To get there, Tesla must get more people to adopt FSD.
Musk mentioned a surprising fact at the earning calls: “Although over half of Tesla owners have access to FSD, many have never even tried it.” This, despite a $99/month subscription offer in North America.
To encourage adoption, Tesla is sending FSD demo videos and actively promoting it to convert users from the $99 trial to the $12,000 full version.
However, introducing and familiarizing users with the FSD feature only after they’ve already purchased the vehicle is a rather delayed effort.
If the goal is to build awareness and trust in FSD among consumers before they own a vehicle, then true technological advancement and large-scale adoption are the most convincing factors.
FSD has now surpassed 1 billion supervised miles as of Q2 2025, with an average of 11 million miles driven daily—a record.
Since the release of Version 12, FSD penetration has risen 25%.
However, Musk believes current hardware still has major room for improvement—for example, increasing parameter count tenfold.
This could be interpreted as Tesla finding it difficult, in the short term, to achieve truly unsupervised—namely, fully autonomous—driving capabilities based on the current HW4 platform.
In response to the existing hardware limitations of FSD, Tesla is considering increasing the number of parameters on HW4 by a factor of 10.
During the earnings call, Musk also revealed that HW5—also known as AI5, which is said to deliver a tenfold performance boost—will finally enter mass production by the end of 2026, marking a clear production timeline.
Tesla aims to first achieve unsupervised FSD on HW4, before addressing HW3 owners—essentially delaying support for older hardware again.
In parallel, Tesla plans to scale up Dojo 2 by 2026, reaching compute power equivalent to 100,000 H100 GPUs, or: 4.95 EFLOPS (FP32), 9.89 EFLOPS (FP16), and 40 EFLOPS (FP8).
For reference, Huawei’s cloud computing power in Oct 2023 was 7.5 EFLOPS.
Notably, Dojo’s compute will also serve other Musk ventures like xAI and Optimus, not just Tesla.
Tesla aims to launch unsupervised FSD to individual users in select U.S. cities by the end of 2025.
Robotaxi expansion is already underway in Austin, and will soon extend to other cities like Florida, Nevada, and the San Francisco Bay Area.
By the end of this year, Musk believes vehicles will be able to autonomously drive to loading and unloading docks.
In Europe, FSD is close to receiving official approval for road use in the Netherlands, with the next goal being approval from the European Union.
The long-standing friendly relationship between Europe and the U.S. makes it the most likely overseas market—outside of the U.S.—for Robotaxi deployment.
Judging by Musk’s emphasis on Robotaxi, his statement that “the company will undergo a fundamental transformation in the coming years” and profoundly change the world is clearly centered around Robotaxi.
Similarly, the new version of his “Master Plan” appears to be built around Robotaxi, Optimus, and xAI—while the importance of the traditional car sales business may be gradually diminishing.
The Low-Cost EV That Musk Won’t Talk About
The rumored “smaller Model Y”—Tesla’s long-expected affordable EV—was once again dodged during the earnings call.
But every time he’s asked about this model, Musk replies, “This is not the place for new car leaks,” and rarely mentions the vehicle even on his most active social media platform.
At a previous event, he mentioned that the affordable model would reduce silicon carbide usage by two-thirds or three-quarters, eliminate rare earth elements in the motor, and adopt other cost-cutting measures.
However, those were comments made two years ago. During today’s earnings call, when asked for more details, he was again evasive.
Musk maintained the same stance: he ignored the question and instead responded to a different one raised by the same person.
According to earlier reports, this model was only accepted by Musk after repeated persuasion and even unilateral action from the Tesla team.
Musk’s attention and energy have clearly been more focused on projects he finds personally interesting—such as Robotaxi, Optimus, xAI, and even politics.
That said, even though Musk does not seem to prioritize the affordable model, it is widely regarded as Tesla’s best hope to reverse its downward trend.
During the earnings call, Tesla revealed that mass production of the affordable model began in June, with a projected launch in Q4 2025.
In reality, the existence of the affordable model may, to some extent, conflict with Musk’s future vision.
This Tesla vehicle serves a similar purpose as the standard version of the iPhone—”the issue isn’t lack of desire, but lack of ability.”
It’s a common strategy used by automakers to boost overall sales volume and isn’t particularly novel.
But while the theoretically more difficult-to-produce Robotaxi is being pushed forward amid skepticism—and personal vehicles will be allowed to join the Robotaxi fleet—Musk has suggested this might happen “as early as next year.”
If the Robotaxi vision really does materialize and opens up to individual users, it could lower the overall cost of owning or using a car.
This also implies that both the affordable model and Robotaxi could achieve similar lifecycle cost reductions—but the legendary Model Q simply doesn’t tell as sexy a story as Robotaxi does.
That, however, lies further in the future. For now, in Q2, Tesla’s free cash flow has dropped from $684 million in Q1 to $146 million.
Tesla’s CFO also revealed that due to tariff policies, the company incurred an additional $300 million in tariff costs during the quarter.
On top of that, with the U.S. ending EV tax credit incentives, Musk bluntly admitted that the next few quarters could be “difficult” for Tesla.
What Tesla faces is the present—right here, right now.
Sure, the future of large-scale Robotaxi deployment and scaling Optimus production to 1 million units annually in five years is a beautiful vision.
But against the backdrop of declining Q2 deliveries and major defects in Optimus 3, Tesla’s trade-offs become even more critical.
Notably, one of Tesla’s most important single markets—China—was completely absent from both the Q2 earnings release and earnings call.
Musk only mentioned that FSD-related features would “soon be approved,” but said nothing about Tesla’s Q2 sales performance in China, market analysis, or the China-exclusive Model Y L.
As for the Model Y L, there was no dedicated launch event—Musk didn’t even promote it on X.
He remains as stubborn as ever, even as he is forced to confront reality today.
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