Background: Tesla is the electric vehicle maker founded in 2003 that helped turn EVs from niche science projects into mass-market cars. For years, it dominated the global EV conversation... and investor imagination.

What happened: Now, Tesla has reported its first-ever annual revenue decline, with 2025 sales down 3% to $94.8 billion USD. The reason? There has been growing competition from BYD and other EV makers, plus a buyer slowdown in Europe. As a result, deliveries in Q4 were down 16% year-on-year.

What else: Instead of fighting harder in EVs, Tesla is leaning into its next act:

• The Model S and X are being phased out with the factory space converted into space for Optimus robots.
• Tesla is investing $2 billion USD into xAI as it shifts focus toward AI
• Tesla is hoping to release Cybercabs (aka autonomous vehicles).

Despite weak results, the share price held steady... because clearly investors are backing the vision over the car sales.

What's the key learning

💡A company’s valuation depends on which business investors think you’re in. If Tesla is viewed as a car manufacturer, falling revenue and declining deliveries are major red flags.

💡But investor long-term perception can outweigh near-term performance. It’s a bit like Amazon’s pivot from an online bookstore to a cloud computing powerhouse. In fact, AWS now generates more than 50% of Amazon’s operating profit. So Tesla is betting AI, robots and autonomous vehicles can play a similar role.

💡As EV sales slow, Tesla is hoping its future-facing businesses will offset the decline...and clearly investors are believing this message too.