Tesla (TSLA) reports earnings after the bell today, and unlike Mag 7 peers, the Street anticipates a contraction. Zacks expects EPS of $0.45, an almost 40% drop vs last year, and revenue of $25.14 billion, -2% vs last year.

Pressure on electric vehicles persists. General Motors (GM) reported a $7.2 billion special charge in its earnings yesterday related to EVs. The storied automaker cited slowing demand and a need to realign its strategy. The end of the EV tax credit is beginning to show its impact.

In addition to the struggling U.S. sector, Tesla is losing the crown abroad: Chinese-based BYD outsold Tesla in 2025 by 620K units.

Of interest: because of the rules around carbon credits, Tesla can sell other, gas-burning car companies emission credits if it overproduces zero-emission vehicles. That’s been a tidy chunk of revenue, but due to the Trump administration’s changes to environmental policies, the value of those credits is falling. At the same, Tesla is also producing less cars than the Street estimated.

Tesla doesn’t have other types of vehicles to fall back on: it has technological innovation, or its charging and power storage network. The latter may provide some stability in the report while investors look to the future of the former. Musk’s enormous pay package is tied to AI and robotic technology it hasn’t rolled out or perfected yet.

While it has grand ambitions for Robotaxis, Tesla is looking to build other sources of revenue and is settling on a subscription model. We have seen tech as a whole shifting to subscription models over the last few decades, and now it’s coming to cars: their Full Self-Drive software will become a subscription instead of coming with the standard vehicle.

Right now, Musk says FSD will be $99/month, but he said on X the price will rise as the system becomes better. Keep in mind that it is using driving data from its vehicles to refine the software, allowing it to profit both from the data collection and the software use.

At the same time, Tesla is also ending its Autopilot software, which has been mired in lawsuits and federal investigations for years. It also faces other probes, including an NHTSA investigation into its mechanical door release that could be causing problems for first responders.

Tesla is also sometimes used as a proxy for other Musk companies, which are all financially entangled to some degree. Traders may see moves related to excitement around a potential SpaceX IPO, or lawsuits facing the social media platform X. All that can complicate some of the moves the stock sees.

As its auto business matures, Tesla investors are looking to Musk to keep the company a tech and AI play as the stock trades around 200x earnings. Guidance will be intensely important on the call, along with any proof of concept updates on Robotaxis or humanoid robots. Musk needs investor faith and buy-in on the company’s transformation.

Right now, the options market is implying a post-earnings move of around +/- $23, or around 5%. The stock is up 8% since last January, but is down 4% year-to-date.

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