Tesla marked a milestone in its transformation into an artificial intelligence company with the launch of its first commercial robotaxi service in Austin during the second quarter of 2025. The achievement, however, came amid declining vehicle deliveries and tightening margins that weighed on earnings.
The company reported USD 1.2 billion in GAAP net income for the quarter, down 16% from the same period last year, while total revenue declined 12% year-on-year (YoY) to USD 22.5 billion. The drop was primarily driven by a 13% decrease in vehicle deliveries and a reduction in regulatory credit revenue, though sequential gains in average selling prices and higher service income helped offset some of the impact.
“This is a seminal point,” CEO Elon Musk said during the earnings call, referencing the debut of paid driverless rides in Austin.
“Customers really love the experience. It’s super smooth, very safe, and just a great experience overall,” said Ashok Elluswamy, vice president of vehicle software at Tesla, who was also on the call. “We already did a first phase of expansion in Austin, and we will continue to expand in Austin to probably more than tenfold our current operating region.” The next target markets reportedly include the San Francisco Bay Area, Nevada, Florida, and Arizona.
Tesla’s initial fleet of robotaxis remains modest, but early signs suggest strong performance: more than 7,000 miles driven in Austin without any critical safety interventions.
Yet while autonomy dominated the quarter’s narrative, the company’s core automotive business continued to face pressure. Tesla delivered 384,122 vehicles in Q2, down from 443,956 a year earlier. Production of a new, more affordable model began in June, but the volume ramp is now expected later this year as the company navigates supply chain complexity and shifts in demand driven by changing incentives.
The US government’s planned rollback of electric vehicle tax credits, set to take effect in Q4, has further clouded the near-term outlook. Tesla warned it may not be able to fulfill late summer orders in time to qualify for the credits, which could weigh on sales.
Still, the company emphasized its long-term roadmap. The Cybercab, a purpose-built robotaxi, is in development with production slated for 2026. Musk said it could ultimately operate at costs below USD 0.3 per mile, potentially undercutting traditional ride-hailing services. Tesla is also advancing its humanoid robot, Optimus, with a third-generation prototype expected by year’s end and mass production targeted within five years.
Tesla’s energy division posted record gross profits, fueled by strong demand for its Megapack battery systems despite challenges from tariffs and expiring consumer credits. Services and other revenue grew 17% YoY, lifted by increased profits from vehicle charging, insurance, and after-sales support.
Musk reiterated his view that Tesla’s future lies in “real-world AI,” positioning the company as a leader in the field. “Isn’t Google good at AI? Yes. But they are not good at real-world AI. Tesla is much better than Google,” he said.
As the company leans further into autonomy, it is scaling its AI training infrastructure to match. Tesla has deployed the equivalent of 67,000 H100 GPUs and is preparing the next version of its Dojo supercomputer platform, expected to be operating at scale in 2026.
Despite the near-term headwinds, Musk remained upbeat. “We have done what we said we were going to do,” he said. “We are not always on time, but we get it done.”