"Tesla (TSLA) Q4 2025 Earnings Call Transcript" January 28, 2025

Speaking of humanoids...

From Motley Fool Transcripts, January 28: 

Call participants

• Chief Executive Officer — Elon Musk
• Chief Financial Officer — Vaibhav Taneja
• Vice President, Vehicle Engineering — Lars Moravy
• Director, Autopilot Software — Ashok Elluswamy
• Head of Investor Relations — Travis Axelrod

Takeaways

• Automotive margins excluding credits -- Improved sequentially from 15.4% to 17.9%, supported by positive regional mix effects despite 16% lower deliveries.
• Total gross margin -- Exceeded 20.1%, the highest in over two years, achieved despite lower fixed cost absorption and tariff impacts.
• Energy revenue -- Reached nearly $12.8 billion, increasing 26.6% year over year, with high deployments across MegaPack and Powerwall in all regions.
• Energy gross profit -- Achieved a new quarterly record, attributed to strong global demand and high deployments.
• FSD paid customers -- Climbed to nearly 1.1 million worldwide, with about 70% representing upfront purchases.
• FSD model shift -- Transitioned fully to a subscription-based sales model, with short-term negative margin impact expected for automotive.
• Free cash flow -- Ended the quarter at $1.4 billion.
• CapEx for next year -- Forecasted to exceed $20 billion, with spending targeted at six factories, AI compute infrastructure, and fleet expansion.
• Bitcoin holdings impact -- Net income negatively affected by a 23% quarter-over-quarter drop in the value of Bitcoin holdings.
• Operating expenses -- Increased sequentially by $500 million, mainly due to higher stock-based compensation and charges linked to operation Maestro under the 2025 CA performance award.
• Services and other margin -- Declined from 10.5% to 8.8%, primarily from increased employee-related costs tied to service center ramp-up for the expanding fleet.
• Backlog -- Ended the year with a larger backlog than in recent years, attributed to record deliveries in smaller international markets and increased demand in APAC and EMEA.
• Model S and X production -- CEO Musk said, "We expect to wind down S and X production next quarter and basically stop production of Model S and X next quarter."
• Optimus production plan -- Plans include converting Fremont's S and X line into an Optimus robot factory with an annual capacity goal of one million units.
• Robotaxi fleet -- CEO Musk stated, "We are well over 500 [robotaxi] vehicles at this point between the Bay Area and Austin," noting a monthly doubling pace.
• CyberCab production start -- CEO Musk said, "We expect to start production in April," indicating an S-curve ramp expectation and long-term production surpassing other vehicle models.
• AI compute investment -- Major investment planned in AI chips, compute infrastructure, and future in-house semiconductor manufacturing (TerraFab), not included in current CapEx guidance.
• Battery supply constraint -- Described as the biggest global constraint, with ongoing solutions such as integrating 4,680 cells in nonstructural packs.
• Energy backlog and outlook -- Strong, globally diversified backlog with increased deployment expected from the launch of MegaPack 3 and Mega Block, though margin compression is anticipated from competition, policy uncertainty, and tariffs.

Risks

• Energy margins face compression from increased low-cost competition, policy uncertainty, and tariffs according to management outlook.
• Automotive margins may see short-term pressure from the transition to a subscription-based FSD sales model.
• Net income negatively impacted by a 23% depreciation of Bitcoin holdings and unfavorable foreign exchange from intercompany borrowings.
• Long-term supply risk cited by CEO Musk: "if we don't do the Tesla TerraFab, we're going to be limited by supplier output of chips," referencing potential chip and memory shortages.

Summary

Tesla (TSLA +0.31%) delivered sequential improvement in automotive margins, record gross margins, and strong revenue growth in energy, while preparing for a transformative shift with higher future capital expenditures and the wind-down of legacy vehicle production. Management outlined aggressive expansion plans focusing on autonomous vehicle and robotics, massive investments in AI compute and factories, and a pivot to a subscription model for FSD, all supported by a robust backlog but tempered by margin and supply chain pressures articulated for the year ahead.

• CEO Musk announced the end of Model S and X production next quarter, reallocating Fremont capacity for Optimus robot manufacturing.
• The CyberCab, a fully autonomous vehicle with no steering wheel or pedals, is scheduled for production start in April and is expected to become the highest-volume model longer-term.
• FSD adoption reached nearly 1.1 million paid customers, with a full transition to a subscription model expected to impact short-term automotive margins.
• Record quarterly and annual energy results were reported, with management forecasting continued growth but flagging risk of margin compression.
• AI chip and compute investments are set to increase further, and management signaled plans for domestic semiconductor manufacturing to address long-term supply risks.
• Robotaxi deployment exceeded 500 vehicles in service and is reportedly doubling monthly, with substantial infrastructure and service network investment to support growth.

Industry glossary

• FSD (Full Self-Driving): Tesla's advanced driver-assistance system offering full driverless vehicle operation, marketed as a software feature on its vehicles.
• Optimus: Tesla's humanoid robot platform, developed for general-purpose automation tasks, with manufacturing now prioritized at scale.
• CyberCab: Tesla's dedicated fully autonomous two-passenger vehicle designed for transportation as a service, without driver controls.
• TerraFab: Proposed large-scale Tesla semiconductor fabrication facility integrating AI logic, memory, and packaging for internal needs.
• 4,680 cells: Tesla's proprietary high-energy-density battery cells, integrated into vehicle packs to address production constraints.
• MegaPack: Tesla's commercial-scale battery storage product for utilities and large energy users, contributing to energy segment growth.
• Powerwall: Tesla's home energy storage solution supporting its residential and small business energy business.
• Operation Maestro: Internal designation for a performance-based stock compensation program referenced in fiscal Q4 2025 financials.

Full Conference Call Transcript....

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In early pre-market action the stock is up $12.84 (+2.98%) at $ 443.30.