To The Moon

After the U.S. market closed today, Tesla $Tesla Motors(TSLA)$ released its latest Q2 earnings report — and the results were undeniably dismal. Both revenue and profits saw significant year-over-year declines, marking the company's steepest quarterly drop in years. However, the stock initially rose slightly in after-hours trading, only to reverse course and fall 4% after Elon Musk issued a rare “pessimistic warning” during the earnings call.

Tesla’s $Tesla Motors(TSLA)$ Q2 Financial Performance

Tesla's total revenue for the second quarter declined by 12% year-over-year — the company’s biggest quarterly drop since 2012. Key details include:

• Automotive revenue fell 16% YoY, the second straight quarter of double-digit decline. Vehicle deliveries dropped 13.5% YoY, marking the largest quarterly decline in company history — though still slightly better than market expectations. This was partly due to backlash over Musk's political ambitions and a temporary production dip from Model Y line upgrades.

• Regulatory credits revenue (i.e. “carbon credits”) plunged over 50% YoY and fell 26% QoQ, marking the fourth consecutive quarterly decline.

• Energy generation and storage revenue dropped 7% YoY, compared to 67% growth in Q1.

• Services and other revenue rose 17% YoY, boosted by continued expansion of the Supercharger network.

Gross margin declined 71 basis points to 17.2% YoY but improved sequentially and beat market expectations of 16.5%. Adjusted net income declined 23% YoY (versus a 39% drop in Q1). Adjusted EPS came in at $0.40, slightly below the $0.42 estimate. Free cash flow tumbled 89% YoY to $146 million, though it remained positive largely due to $320 million in "other gains."

Source: Tesla Q2 Result

Progress on New Models and Robotaxi

Despite the financial pressures, investor attention has shifted toward Tesla’s upcoming product launches and the development of its Robotaxi business. The company reaffirmed timelines for its next-generation models — most notably its affordable compact EV and the purpose-built Cybercab for Robotaxi use. The first entry-level model launched in June is still on track to enter mass production later this year, while the Semi truck and Cybercab are slated for 2026 production.

Meanwhile, Tesla announced it is preparing to unveil a new autonomous driving platform, with FSD V13.0 already in internal testing and gradually rolling out to users in North America.

Musk’s Pessimistic Outlook

However, during the earnings call, Musk and the management team delivered a rare pessimistic forecast. They warned that a potential Trump administration rollback of EV tax credits and green subsidies could hurt demand, while new tariffs would add about $300 million in cost to Tesla. The company plans to ramp up sales before the U.S. tax credit policy expires, which may delay certain new model releases.

Musk stated bluntly that Tesla is in an “unusual transition period” and may face “several tough quarters” ahead if U.S. stimulus policies are withdrawn.

How Should We View Tesla’s Stock Price?

Despite two consecutive quarters of sharp earnings declines, Tesla’s stock has continued to climb — apart from a short-lived correction in Q1 following the Trump rally and political controversies involving Musk. In Q2, the stock remained resilient despite weak fundamentals, buoyed by recurring hype around Robotaxi developments.

Source: Google Finance

Tesla’s investment narrative is becoming increasingly polarized. With the potential rollback of the Inflation Reduction Act (nicknamed the “Big Beautiful Bill”), and Musk’s fallout with Trump, Tesla is expected to lose hundreds of millions in carbon credit revenue and EV tax incentives annually. This would further amplify its near-term earnings headwinds.

Yet Tesla’s loyal investors seem largely unbothered by the deteriorating fundamentals. They continue to focus on the company’s potential in the multi-trillion-dollar Robotaxi space and Musk’s growing influence following his launch of the "American Party." On the flip side, skeptics point to Tesla’s weakening core EV competitiveness and declining policy tailwinds as unavoidable realities.

From our perspective, Tesla's current valuation appears to have already priced in much of the anticipated Robotaxi upside — despite the fact that the business remains far from commercialization and faces intense uncertainty around timing and competition. This makes Tesla one of the most speculative large-cap tech stocks in the U.S. market. The aggressive forward-pricing of future value means the stock is increasingly vulnerable to sharp corrections.

However, it’s undeniable that Musk — through his personal charisma and compelling vision of an autonomous future — continues to attract a devoted investor following. This belief system may help Tesla sustain elevated stock levels despite current headwinds in its EV business.

Invesight Viewpoint

Tesla $Tesla Motors(TSLA)$ is now at a critical crossroads where investor faith collides with operational reality. On one hand, its core EV business is facing mounting pressure from slowing demand and weakening policy support. On the other hand, the market continues to assign a significant premium to its futuristic Robotaxi ambitions.

For investors, Tesla’s valuation no longer hinges on financial metrics alone, but rather on confidence in a long-term vision. In this volatile mix of lofty expectations and deep uncertainty, Tesla’s stock is likely to remain highly volatile — and demands both clarity and caution from all market participants.$$$$$