Tesla Q2 Earnings Preview: All Eyes on Autonomy, AI, and Austin

Three Key Takeaways Ahead of Tesla Earnings

• Investor focus has shifted from EV deliveries to Tesla's autonomous and AI strategy, including the nascent robotaxi rollout in Austin and growing integration with xAI.

• Q2 results are expected to show weak EV demand and delivery declines, but bulls are looking past that toward a $1 trillion valuation opportunity in autonomy and robotics.

• Musk’s political involvement and Tesla’s exposure to regulatory changes, particularly EV tax credit removals and Chinese tariffs, pose headwinds to fundamentals and investor sentiment.

Tesla is set to report earnings Wednesday after the close in what could mark a defining moment in the company's transition from carmaker to AI powerhouse—or at least that's the hope of the bulls. Shares of TSLA have been straddling the 200-day moving average at $317 as investors grapple with an unusual cocktail: deteriorating fundamentals, Musk's political side quests, growing questions around EV subsidies, demand softness, and mounting global competition… all while the company is simultaneously pitching itself as the front-runner of the “physical AI” revolution. And now there's more Musk than ever.

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The Setup: A Quarter That’s Not About the Quarter

Let’s start with what the Street expects. Consensus estimates peg Tesla’s Q2 revenue at $22 billion, with automotive revenue of $16 billion and EPS of $0.39. Analysts expect auto gross margins (ex-credits) in the 13–14% range, while energy deployment will likely fall short of targets, having reached just 9.6 GWh vs. expectations for 12 GWh. Delivery volume fell 14% YoY to 384k units—above buyside whisper numbers, but still disappointing in context.

Yet, very little of this seems to matter.

Instead, this quarter will serve as a referendum on autonomy, AI, and Musk’s new promise: that Tesla is a physical AI company on the cusp of a trillion-dollar transformation. Bulls see robotaxis, Optimus bots, and AI inference at the edge of vehicles—not just cars, but an entirely new platform for mobility and automation.

Robotaxi Rollout: The Real Earnings Narrative

The biggest catalyst heading into the print is Tesla’s robotaxi expansion, which formally began in Austin in late June. Musk claims the service will expand into the Bay Area within 1–2 months, pending regulatory approval. While the initial deployment includes just 20 vehicles operating in a geofenced zone, Wedbush calls this “the official kickoff of Tesla’s $1 trillion autonomous era.”

Canaccord estimates that Tesla’s cost per mile for robotaxi service could fall below $1.00 at scale, undercutting Uber and Lyft’s ~$3.00 per mile rates. The company could light up a multi-million vehicle installed base with just a software update—if, of course, regulators allow it.

But key risks loom. Lawmakers in Texas have asked Tesla to delay the rollout until a self-driving safety law takes effect in September. Critics warn that early success in one market doesn’t guarantee scalability—especially across diverse geographies and weather conditions.

AI Integration and the xAI Wildcard

Another major focus will be xAI, Musk’s AI startup that’s rapidly intertwining itself with Tesla. Analysts at Oppenheimer expect management to increase messaging around Tesla’s role as the hardware and manufacturing arm of Musk’s broader AI empire. A shareholder vote on direct Tesla investment into xAI is expected later this year.

Meanwhile, Musk recently announced Grok—xAI’s chatbot—will soon be integrated directly into Tesla vehicles, another step in the company’s vision of a personalized, intelligent in-car experience. Some see it as a gimmick. Others see it as Apple CarPlay on steroids.

Expect investor questions around how xAI will be monetized, whether Tesla will own equity or simply provide infrastructure, and how data sharing between Tesla and xAI will work.

EV Fundamentals and Macro Headwinds Still Linger

Beneath the AI frenzy lies a business grappling with reality. Tesla’s delivery miss in China (-6.8% YoY) marked the third consecutive quarterly decline, despite June showing a modest uptick. EV competition is intensifying—BYD, Nio, Xpeng, and others are eating into Tesla’s market share with cheaper models.

Compounding that is the elimination of the $7,500 U.S. EV tax credit via the Beltway’s “Big Beautiful Bill,” along with lost profits from regulatory credits. Wolfe Research now sees over $2 billion in profit at risk. In Europe, Model Y sales are soft, while in North America, Tesla's Q2 strength likely reflected credit-driven pull-forwards. The company's strong inverter and battery share growth in California is encouraging but remains immaterial to the bottom line.

Tariff Trouble and Musk's Side Missions

On the macro front, the looming 93.5% U.S. tariff on Chinese battery materials could disrupt supply chains. Musk says Tesla is well positioned thanks to localized sourcing, but gross margins are still low, and any additional friction—especially in batteries—could hurt.

Then there’s Musk himself. His spat with the Trump administration and aspirations to create a third part in America continues to draw controversy. Morgan Stanley’s Adam Jonas has called him the “party crasher” and warns of “further devotion of resources” to non-core projects.

The recent departure of Tesla’s top North American sales exec and ongoing brain drain concerns don’t help. Nor do tensions at X, where CEO Linda Yaccarino’s departure reportedly followed months of internal friction.

Valuation vs. Vision: Can Tesla Pull It Off?

Tesla’s valuation remains lofty. At ~$317, shares trade around 70x forward earnings—still rich for a company with declining deliveries and volatile gross margins. But the bulls are thinking bigger.

Wedbush, which maintains a $500 price target, believes autonomy and robotics could be worth $1 trillion alone. Morgan Stanley holds firm at $410, while Deutsche Bank is at $345. Meanwhile, Canaccord and Oppenheimer are more cautious, warning of execution risk and margin pressure.

The stock has been volatile but resilient. Whether the robotaxi narrative can offset weak Q2 results and macro risks remains the open question.

Final Thought

Tesla’s Q2 earnings will be less about what just happened and more about what’s coming. Musk is selling a vision that’s exponentially more ambitious than “just” making cars. If investors buy in—even with eyes wide open to the risks—Tesla may get the benefit of the doubt for one more quarter. But execution must follow soon, or even robotaxis won’t be able to drive this valuation.