By Becky Peterson
Tesla's revenue fell 3% in the fourth quarter as the company lost its lead as the world's leading electric vehicle maker to China's BYD.
Tesla reported $24.9 billion in revenue for the quarter. It also posted $94.8 billion in revenue for all of 2025, down 3% from the year before.
Tesla reported $0.50 in earnings per share, beating analyst expectations of $0.45.
Tesla also reported free cash flow of $1.4 billion for the quarter, down 30% from the year before, as it invests heavily in research and development in robotics and artificial intelligence. This beat analyst consensus of negative free cash flow for the quarter.
Tesla shares rose more than 3% in after-hours trading.
The results highlight the tough road ahead for Tesla as CEO Elon Musk tries to turn the focus to the company's artificial intelligence and robotics strategies, putting the electric vehicle business on the back burner.
Tesla EV sales fell 16% during the fourth quarter from a year earlier. The company said it sold 1.64 million vehicles in 2025, a 9% drop for the full year, putting it behind BYD's 2.26 million in EV sales last year.
Tesla's business model will be tested over the next few months. Musk is turning his attention to expanding Tesla's AI capabilities, but the company still has to compete in an increasingly crowded EV market with an aging vehicle lineup and fewer government subsidies to incentivize buyers.
Musk warned at the end of July that Tesla "could have a few rough quarters," though the company hit a sales record in the third quarter as buyers in the U.S. rushed to purchase EVs before a $7,500 federal tax incentive expired in September.
In November, Tesla shareholders approved a new pay package for Musk that could be worth as much as $1 trillion if he meets a series of goals over a 10-year period. Tesla's board said the expensive package is necessary to keep Musk engaged at the company as it transforms from selling EVs to focusing on AI and robotics.
In December, Musk got more shares after Tesla won an appeal in Delaware's Supreme Court that reversed a lower court's decision to cancel his 2018 pay package.
The company's sales had been in a freefall since Musk's embrace of partisan politics in 2024, which brought protests and worsened the company's reputation in regions where Tesla was once popular, including California and Europe.
Tesla has lost market share around the globe, as it faces growing competition from car makers in the U.S. and China.
Write to Becky Peterson at becky.peterson@wsj.com
(END) Dow Jones Newswires
January 28, 2026 16:29 ET (21:29 GMT)
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