Tesla

Shares of TSLA declined by 4% in after-hours trading as investors wanted to hear more from the company about expected progress this quarter for Robotaxi in Austin. While the disappointment is understandable, it doesn't change the fact that Tesla is still best positioned to capitalize on autonomy and physical AI long term. As for deliveries, they should quicken in mid 2026 as the new, more affordable model begins to aggressively ramp.

Elon’s success at changing the TSLA investment narrative to autonomy has shifted the focus topics for June earnings. Investors will zero in on five topics on the call: 1. Commentary about expansion of the robotaxi service 2. Timing of the new more affordable vehicle or Cybercab 3. Impact of the tax credit sunset on deliveries 4. The typical focus on auto gross margins ex credits. 5. Timing of Hardware 5. I continue to be positive on TSLA given they remain best positioned in physical AI.

For years, EV buyers fixated on range as the key buying metric in response to range anxiety. As Tesla enters the autonomous era, a new metric is taking center stage: the strength of the car’s self driving hardware. A Tesla’s processor and sensor suite (HW3 vs HW4 vs upcoming HW5) now determine how well it can run FSD software and whether it can access future autonomy upgrades. I believe HW5 will be needed for the fleet to go mainstream, and upgrading existing hardware will be cost prohibitive. The bottom line: Tesla is best positioned to be one of the biggest winners in autonomy, despite the reality that rolling out new hardware will be a near term governor on growth.

In June, U.S. EV sales were down 6%, compared to up 9% in March 2025. I believe we will return to growth next year because EV headwinds around tax credits, buyer options, charging infrastructure, and range anxiety are temporary. By 2030, I expect 25% of new car sales in the U.S. will be EVs, up from 8% today. The timeline to mass electrification has stretched, but the economic incentives are still in place for them to eventually account for all vehicle sales. Once mainstream buyers internalize that an EV can cost half as much to “fuel” and meaningfully less to maintain, adoption should accelerate, especially as charging infrastructure scales and compelling sub-$40k options proliferate.

June deliveries came in 4% above whisper expectations and in line with the published consensus. Most investors, including myself, were expecting around 370,000 units, down 17% y/y. Instead, Tesla reported 384,122, a 14% decline. The good news: that -14% should mark the bottom (March 2025 was -13%), with growth rates improving going forward. More importantly, if deliveries hold steady over the next couple of years and the company makes measurable progress on Robotaxi and FSD, the stock should respond positively.

Tesla will report June deliveries the morning of July 2nd. We expect deliveries of 370k, down 17% y/y, compared to FactSet consensus calling for down 12%, and down 13% last quarter. The June quarter should mark the low point of the delivery declines, and we expect the back half of the year will show improvement, albeit still declining. We expect investors will take two things away from the June deliveries: 1) June was an ugly number and that's ok because the worst should be behind us. 2) Despite the delivery declines, the company has ample cash to continue to invest in new vehicles and autonomy. We expect the overall cash and investments position to end the year between $33–35B, compared to $37B at the end of March. That said; all that matters for shares of TSLA over the next six months is the pace of the Robotaxi rollout.

Next week’s soft launch of Robotaxi in Austin matters because the economics of autonomy are compelling. This note outlines sensitivity to both the numbers and the timing of service ramp-up. The bottom line: there's a lot riding on how Robotaxi performs in Austin from a safety standpoint, as autonomy is Tesla's future.

Tesla will reportedly unveil its robotaxi service on June 12 in Austin on the heels of the Musk vs. Trump drama. The initial launch is said to be small and is of little importance in our eyes. What's of critical importance is whether the President will make it more difficult for Tesla to scale the service, along with its safety track record. My take: Trump will stay on the sidelines given autonomy is central to physical AI, and for the US to be a leader in AI, it also needs to be a leader in physical AI.

We evaluated AI’s staying power based on March earnings from key tech providers. Growth rates are not slowing as quickly as many investors had feared, suggesting that AI’s momentum remains intact. Concerns about the pace of improvement in AI models may actually strengthen the case for increased investment. Fundamentals and the outlook for AI growth and investment are either stable or improving compared to three months ago — despite ongoing uncertainty around tariffs, macroeconomic conditions, and the speed of model innovation.

While I expect Street EPS and revenue estimates for 2025 to be revised downward following the March earnings report, that reality is largely noise for Tesla investors. The takeaway for most will likely be that 2025 is a throwaway year—one that sets the stage for a major rebound in 2026 and beyond. Tesla is in a unique position: its opportunity in physical AI is so compelling that investors are willing to look past what will likely be a difficult year. In my view, 2025 doesn’t matter; the business is poised for meaningful improvement starting next year.

Tesla’s March deliveries missed expectations, down 13% y/y, largely due to brand damage and to a lesser extent production changeover. June will likely get worse before improving in September and we expect CY25 deliveries to decline 9%. However, CY26 is setting up to be a rebound year with 35% delivery growth driven by brand recovery, renewed EV demand, and a more affordable model. Longer term, the investment case continues to hinge on Tesla solving autonomy and scaling robotics.

Modeling Tesla is getting progressively more difficult as they navigate this period of brand damage, increased investments, and macro uncertainty. On top of that, the company does not give detailed guidance. All of that said, we’re putting together our best guess on how the numbers shake out over the next couple of years. We expect CY25 revenue to be flat (vs. Street at +7%) and non-GAAP earnings to fall between $2.00–2.20 (vs. $2.74). In CY26, we expect revenue to grow 35% (vs. Street at 22%) and earnings to rise to $3.00–3.40 (vs. $3.76).