Tesla made smallest annual profit since the pandemic, plans to spend big
on robotaxis and robots
[January 29, 2026] By
BERNARD CONDON
NEW YORK (AP) — Tesla’s annual profit plunged to its lowest level since
the pandemic five years ago as it lost the title of the world’s biggest
electric vehicle maker to a Chinese rival and boycotts hammered sales.
The EV company run by Elon Musk reported Wednesday that net income last
year dropped 46% to $3.8 billion. It was the second year in a row of
steep declines. The drop came despite the introduction of cheaper models
and Musk's promise to remain laser-focused on the company after a foray
into U.S politics.
Still, Tesla investors have kept the faith in Musk. The stock is up 9%
in the past year.
Musk has been urging investors to focus less on car sales and more on
what he considers a bright new artificial intelligence future of
robotaxis ferrying millions in cars without drivers, or even steering
wheels, and robots watering plants and taking care of elderly parents.
On a conference call, Musk underlined that shift by announcing Tesla had
decided to close down production of two older car models, S and X, in
the second quarter and convert a Fremont, California, factory to produce
its Optimus robots instead.
Making those future ambitions a reality will take money. Officials said
Tesla would spend big on AI and others new projects this year, more than
doubling capital expenditures to $20 billion. And the company revealed
it had recently invested $2 billion in the artificial intelligence
company xAI, raising potential conflicts of interest issues as Musk
holds big stakes in both companies.
That AI business, known for its Grok AI assistant, has courted
controversy for echoing Musk’s views on race, gender, and politics and,
recently, producing nonconsensual sexualized deepfake images.
Tesla's fourth quarter profit also fell sharply, dropping 61% to $840
million, or 24 cents. But excluding one-time charges, net income totaled
50 cents per share, compared to analysts' forecasts of 45 cents.
“They’ve got aging product that is less and less competitive as other
manufacturers come out with new models, then there is the general brand
destruction," said Telemetry analyst Sam Abuelsamid. "Musk‘s involvement
in politics has turned off customers.”
There were hopeful signs in the report, too. Tesla's energy storage
business, though small compared to the car sales, posted strong numbers
last quarter with revenues surging 25% to $3.8 billion reflecting demand
from new datacenters sucking up energy around the U.S.
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Elon Musk attends the Annual Meeting of the World Economic Forum in
Davos, Switzerland, Thursday, Jan. 22, 2026. (AP Photo/Markus
Schreiber)
 Tesla's gross profit margins were
another bright spot, leaping to 20% last quarter from 16% a year
ago.
“Tesla’s ability to show improving profitably was a surprise,” said
Morningstar analyst Seth Goldstein.
Goldstein said he was also encouraged by plans outlined in Tesla’s
earnings report to roll out robotaxi service in Houston, Miami and
five other cities in the first half of this year. In the conference
call, the company also said that it would begin producing its
two-seated Cybercab with no wheels or pedals in the same time frame.
But Musk is well know for making promises with deadlines he never
meets.
Musk said that European regulators would approve its partial
self-driving software in the first three months last year, a
potential big boost to Tesla sales there. But that hasn't happen
yet. And a strong revival in sales Musk heralded midway through the
year also failed to materialize.
The robotaxi program has progressed slowly, which Musk told
investors is due to Tesla being extremely cautious to avoid mishaps.
Tesla promised robotaxi rides without anyone driving the car, but
until recently the cars had supervisors inside to grab the controls
in case something went wrong. Tesla has now removed the safety
drivers in Austin where it launched the service in June.
For some on Wall Street that is enough to keep pushing the stock up.
One of Wall Street’s most bullish analysts, Dan Ives of Wedbush
Securities, expects robotaxis will be in more than 30 cities by the
end of this year, and that Tesla will capture 70% of the global
market for self-driving cars in a decade.
Ives and others are also encouraged that Musk has shifted his focus
back to the company after spending months as head of a government
cost-cutting team in Washington.
But it’s not clear his attention will remain as undivided in the new
year. He has plans to take his rocket company SpaceX public,
possibly in June, in what many expect to be a blockbuster IPO that
make him the world’s first trillionaire — but also possibly distract
him.
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