Tesla is the only stock on Wall Street that attracts attention. Formerly a darling of innovation and a bellwether of the stock market on artificial intelligence and green power. Tesla (NASDAQ: TSLA) is currently at the center of a heated debate before the crucial upcoming second-quarter earnings report scheduled to be released on July 23, 2025. Analysts are divided and investors are nervous and the stakes even higher.
The Process
At the beginning of 2025, Tesla was in volatile clouds. The firm has managed through an incredible stock drama, as it stumbled almost 34% since December 2024 highs before making something of a comeback in the spring. A decline in electric vehicle (EV) demand, unmet delivery expectations and investor sentiment rattled after CEO Elon Musk went deep into political and cultural controversies only added downward pressure to the mix.
The Q2 deliveries of 384,122 vehicles fought an overwhelming 13.5% year on year drop, the worst quarterly decline recorded in the company. To put this into perspective, this comes along with a daring forecast by Tesla two years ago to increase its annual production of EVs by half.
Rather, this prediction has disappeared and there is a sense of uncertainty, as now Musk himself makes declaring statements especially public, which wave the markets nearly to the extent that company fundamentals would.
Mixed Signals Flash by Analysts
The sentiment among analysts is restrained. Baird also reiterated its “Neutral” rating on July 16 with its stock price warning about risk to estimates caused by full-year volume forecast as well as possible margin squeezing in the Energy segment. Cars are not the only margin business Tesla has concerns with, its once red-hot Energy Storage business is being squeezed as competition intensifies and costs creep lower, as Q2 deployments caught up to 9.6 GWh despite still growing a healthy 20% year-over-year.
Spoiler Alert
Wall Street is bracing a bumpy revenue and margin print this quarter. The current consensus estimates include a decrease in revenue (approximately 12%) to $22.48 billion, a decrease in earnings per share (EPS) (approximately 23%) to 0.40. Analysts expect a 25.9% decrease in full-year earnings during the year, as we saw last quarter when Tesla posted revenues of merely $19.34 billion, around 16.3% automotive gross margins, and more than 29% earnings per share misses.
A big part of the destruction is instigated by:
- Margin Squeeze: The price reductions, incentives, and new competitors, automotive gross margins are now 16.3%, against 25-30% during the peak day of Tesla.
- Volume Headwinds: The global sales decline due to some intense competition due to old brands (commodity), and another Chinese giant, BYD which is conspicuously taking over not only the Chinese but the European market as well.
- Credit Loss: Waning regulatory credit sales, it was a constant source of profit before. Now it is a drag on profitability.
- Increasing Energy Costs: With the expansion of the energy arm, its deployment costs have increased and competitive pressures have matured, primarily in battery storage, and squeezed energy segment margins below the bullish operating assumptions.
Can AI Re-write the Story?
Even with the dark shapes hanging over its car bread-and-butter, the technological advantage, particularly in the area of artificial intelligence and robotics, is one bulls are keeping an eye on at Tesla. The business is going all in on autonomous driving technology and the potentially world-changing platform of the Robotaxi. Tesla introduced its first Robotaxi services in June, in Austin, Texas, which uses the heavily-touted Full Self-Driving (FSD) feature.
Even some of the biggest players in the investment community including Ark Invest CEO Cathie Wood and Wedbush analyst Dan Ives have even gone so far as to speculate that the Robotaxi platform has the potential to unlock trillions in additional value in the coming years. But at Q1 call, Musk himself acknowledged that it is probably not until mid-2026 at least when Robotaxi (or its Optimus AI-driven robot project) could expect a significant financial impact. The short answer is that the technology is great but not a quick financial solution.
Tesla Brand, Politics, and Perception
Audiences on the drama outside the factory are also investors. Promotion of unpopular political policies by Musk, not only in the U.S., but globally, has tarnished brand popularity, especially in Europe. At the start of July during his most recent political party-building escapade, Tesla share price fell 6.79%. Many of its old-time fans have lost faith in Musk, yet there are still old-time fans who view his disruptive vision as Tesla’s greatest asset and the greatest risk.
There Is Competition All over
Tesla is no longer enjoying its comfortable lead in EVs. Old car titans and upstarts such as BYD and Lucid are catching Tesla on technology, increasing production, even at higher prices and battery innovation in major markets, where they are also undercutting Tesla on price through better incentives. Similarly, in the Robotaxi race, new entrants are already out on the road, meaning the future is becoming more or less cloudy to the Tesla exclusive articulation over the autonomous crown.
All this turbulence indicates Tesla, which despite being appealing is no longer the obvious leader among AI-based stocks. The shares of Tesla have gained only 8% on a two-year basis, as against a searing 217% run-up in shares of AI chipmaker Broadcom, the pitting of which has caused some analysts to suggest that Tesla may want to maybe cede its spot in the so-called Magnificent Seven stock grouping.
What’s Next?
The projected outcomes at Q2, a decline of revenues and profits add up to double-digits, will further compel Elon Musk to present his vision in terms of growth, particularly in the spheres of AI and energy. Provided that Tesla is able to scale its autonomous ambition and recover the trust in the market, the stock might crawl back in the second part of 2025. The subsequent quarters will be demanding patience, and critical thinking.
