Wall Street braces for declines in profit and revenue
Tesla is set to release its second-quarter earnings on July 23 after market close, with analysts projecting adjusted earnings per share of $0.39 and revenue of $22.22 billion. Both figures represent double-digit declines from the same quarter last year, driven by a 25% drop in EPS and a 13% dip in sales. Despite continued retail investor enthusiasm, Tesla shares are down 16% year-to-date, trailing the broader S&P 500 and shedding nearly one-third of their value since December.
The slide reflects concerns about lower sequential deliveries and the lingering impact of aggressive price cuts. Analysts expect automotive gross margin to contract again from 18% a year ago, with shrinking average selling prices and rising tariffs contributing to margin pressure.
Retail focus: FSD progress and new model updates
Retail investors remain firmly engaged, looking for updates on key innovation fronts. Attention will center on the Full Self-Driving (FSD) rollout, developments from the Austin-based robotaxi pilot, and any clarity regarding the long-awaited affordable Tesla model. While timelines have been elusive, any progress could serve as a catalyst to support sentiment.
Another priority for investors will be how Tesla manages cost structures amid shifting U.S. policies. The recent Big Beautiful Bill removes federal tax credits for electric vehicles, raising concern about weakening domestic demand and the loss of regulatory-credit income — historically a buffer for earnings.
Political distractions and market sentiment
Elon Musk’s political activity could add another layer of uncertainty. After endorsing Donald Trump, later clashing with him, and now founding his own political party, Musk may face scrutiny over whether his political ambitions interfere with Tesla’s strategic focus. While investors often tolerate eccentric leadership, signs of distraction could weigh on confidence in execution.
Meanwhile, Tesla’s energy generation and storage segment, though still a small part of overall revenue, continues to grow at a solid pace. Any acceleration in this area would signal healthy diversification and longer-term stability. Traders are also preparing for volatility — options markets are pricing in a 7% swing in either direction following the earnings release.
AI, margins, and the path forward
Tesla’s near-term story hinges on its ability to control costs, maintain margins, and articulate a strong AI-driven roadmap. In the absence of immediate delivery growth, investors will look to narrative strength and innovation progress as the key support for valuation. As the electric vehicle market becomes increasingly competitive and geopolitics influence regulatory environments, execution clarity is more important than ever.
