Why Tesla’s Rising Despite a Massive Earnings Fall

Pure play EV carmaker Tesla wasn’t expected to reverse its fortunes in its second quarter (Q2) of 2025. Its Q2 earnings release on the 23rd of July clocked in with revenues of $22.50 billion versus LSEG analysts’ polled expectations¹ of $22.74 billion while adjusted earnings per share came in at $0.40 versus an expectation of $0.43 cents. Furthermore, both CEO Elon Musk and CFO Vaibhav Taneja warned about higher tariff costs and the expiration of federal electric vehicle tax credits in the US potentially creating further impact across future quarters.

However, after a rapid drop in the stock’s price immediately after the earnings release, it went on to ride a series of cautious upticks. The reasons behind this are hidden deep within the line item trends.

Trend Analysis

As the article² describing Tesla’a delivery numbers released on the 2nd of July indicated, deliveries in the Western Hemisphere were trending at a 28% decline as of Q1 2025 relative to deliveries made across 2024. But with Q2 2025 registering a 17% uptick in Western Hemisphere deliveries over Q1 2025, deliveries in these regions are now trending at a 18% decline as of H1 2025. However, overall deliveries were still trending to be 20% lower than in 2024.

The line item trends largely reflect the exact same trends in automotive sales as of the first half (H1) of 2025.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

Source: Company Information; Leverage Shares analysis

While automotive services and energy solutions shore up the overall revenue to some extent, present trends indicate that total revenues would still be 14% lower than the previous Fiscal Year (FY) 2024. While cost of revenue show the same trend, operating expenses are trending to be 10% higher than the previous FY, largely on account of a significantly increased spend in research and development (R&D). As a result, net income is trending to be 48% lower than previous FY’s – which was also a period of decline.

Energy generation and storage solutions have grown in stature, with a more than doubling of revenue contribution since 2019.

Source: Company Information; Leverage Shares analysis

Nonetheless, the drop in automotive sales drive the company’s declining fortunes and are in line with the company’s declining market share in key markets.

What’s driving some of the cautious optimism, however, has been trends in its inventory and its free cash flow:

Source: Company Information; Leverage Shares analysis

Tesla has historically had a very small gap between delivery and production, thus leading its inventory to essentially form one proxy of future sales. Going by current levels of inventory, it seems that the company’s sales still have some tailwinds.

Secondly, the company’s free cash flow – calculated as the difference in net cash from operating activities and the net cash used in investing activities – seems to indicate an initial uptrend after two years of negatives as the company built out AI infrastructure and upgraded production facilities. The positive cash flow is taken to imply greater pass-through efficiencies from revenue to net income in quarters to come.

In Conclusion

In a bid to expand its declining sales and better utilize existing production lines, CEO Elon Musk announced that cheaper versions of the Model Y³ would be introduced later in the year. However, it seems that the company’s work on developing a cheaper model would be reserved for the Cybercab – the fully-autonomous product offering that is still in the works.

Until the Cybercab is released or until the cheaper models manage to create an uptick in sales, the stock is likely to continue having a rocky trajectory.

Professional investors with access to European exchanges and a tactical bent of mind might want to consider the 3X Tesla ETP (TSL3) during upsides of the stock’s trajectory and the -3x Short Tesla ETP (TS3S) during the downsides.

Another method of buying into Tesla’s trajectory to potentially generate income is the Tesla Options ETP (TSL), which generates monthly income by buying Tesla shares, selling up to 5% ‘out-of-the-money’ (OTM) weekly call options on Tesla and paying a return on the premia collected.

Footnotes:

„Tesla reports sales miss as auto revenue drops for second straight quarter“, CNBC, 23 July 2025
„Why Tesla’s Q2 Delivery Numbers Raised the Stock“, Leverage Shares, 4 July 2025
„Elon Musk on Tesla’s new ‘affordable’ electric car: it’s the Model Y“, Electrek, 24 July 2025

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