Tesla

Next week’s soft launch of Robotaxi in Austin matters because the economics of autonomy are compelling. This note outlines sensitivity to both the numbers and the timing of service ramp-up. The bottom line: there's a lot riding on how Robotaxi performs in Austin from a safety standpoint, as autonomy is Tesla's future.

Tesla will reportedly unveil its robotaxi service on June 12 in Austin on the heels of the Musk vs. Trump drama. The initial launch is said to be small and is of little importance in our eyes. What's of critical importance is whether the President will make it more difficult for Tesla to scale the service, along with its safety track record. My take: Trump will stay on the sidelines given autonomy is central to physical AI, and for the US to be a leader in AI, it also needs to be a leader in physical AI.

We evaluated AI’s staying power based on March earnings from key tech providers. Growth rates are not slowing as quickly as many investors had feared, suggesting that AI’s momentum remains intact. Concerns about the pace of improvement in AI models may actually strengthen the case for increased investment. Fundamentals and the outlook for AI growth and investment are either stable or improving compared to three months ago — despite ongoing uncertainty around tariffs, macroeconomic conditions, and the speed of model innovation.

While I expect Street EPS and revenue estimates for 2025 to be revised downward following the March earnings report, that reality is largely noise for Tesla investors. The takeaway for most will likely be that 2025 is a throwaway year—one that sets the stage for a major rebound in 2026 and beyond. Tesla is in a unique position: its opportunity in physical AI is so compelling that investors are willing to look past what will likely be a difficult year. In my view, 2025 doesn’t matter; the business is poised for meaningful improvement starting next year.

Tesla’s March deliveries missed expectations, down 13% y/y, largely due to brand damage and to a lesser extent production changeover. June will likely get worse before improving in September and we expect CY25 deliveries to decline 9%. However, CY26 is setting up to be a rebound year with 35% delivery growth driven by brand recovery, renewed EV demand, and a more affordable model. Longer term, the investment case continues to hinge on Tesla solving autonomy and scaling robotics.

Modeling Tesla is getting progressively more difficult as they navigate this period of brand damage, increased investments, and macro uncertainty. On top of that, the company does not give detailed guidance. All of that said, we’re putting together our best guess on how the numbers shake out over the next couple of years. We expect CY25 revenue to be flat (vs. Street at +7%) and non-GAAP earnings to fall between $2.00–2.20 (vs. $2.74). In CY26, we expect revenue to grow 35% (vs. Street at 22%) and earnings to rise to $3.00–3.40 (vs. $3.76).

This question comes at a time when Street estimates likely need to be revised downward. Following the expected reset on April 2nd, I estimate global demand for Tesla's will rise by approximately 1.5% over the next 12 months as a result of the new tariffs. While Tesla prices may inch up due to tariffs on auto parts, prices for other automakers are expected to increase even more—making Teslas relatively more affordable compared to the competition.

Deepwater’s second annual Frontier Tech Survey measures the American public’s viewpoint on emerging technologies, including AI, Electrification & Automation, the Creator Economy, and Relationship with Tech. Key Takeaways: AI – General usage is increasing but we are still early in the…

The odds of Tesla successfully capitalizing on autonomy increased with the news that Trump's transition team is planning to make regulating self-driving vehicles a top priority. Tesla holds a unique position, as it can pursue autonomy through a combination of two business models: asset-light, focusing on vehicle hardware sales, or asset-heavy. I believe these strategies could significantly boost Tesla's operating profit by the end of the decade, with a wide range of potential outcomes—anywhere from a 10% to a 155% increase, depending on which model they pursue. My prediction: by 2030, autonomy will account for 40% of Tesla's operating income.

It is becoming increasingly clear that the $7,500 EV tax credit will likely end in the US next year. While this outcome has been largely anticipated since late summer, Musk's relationship with Trump left open the possibility that the incentive might be preserved. As a result, deliveries this quarter are likely to exceed expectations as demand is pulled forward. For next year, I believe the company will still meet the Street's 14% y/y growth expectation, which is below Elon’s recent projections of 20–30% growth. Either way, delivery growth is expected to accelerate from being flat in 2024 to 12% in 2025.

Tesla posted a surprising profit margin in the September quarter while guiding the December quarter and 2025 deliveries well ahead of expectations. Additionally, I believe Cybercab will be a measurable boost to deliveries, accounting for about 15% of deliveries by 2032. Putting these together, we're seeing signs that EV growth is returning, the most critical piece to the 3-year Tesla investment case.

On the surface, the waiting game will continue for TSLA investors as the Cybercab and Optimus are still years away. Beneath the surface, the "We, Robot" event posed a challenge for traditional automakers as Tesla showcased an innovation edge that puts an end to the "Is Tesla a tech or car company?" debate.