• Tesla reports its first annual revenue drop, with a 3% decline in 2025.
• The company plans to pivot to AI and robotics, ending production of the Model S and Model X.
• CEO Elon Musk emphasizes investments in humanoid robots and AI technology.
• China's BYD surpassed Tesla as the world's largest EV maker amid increasing competition.
• Tesla's capital expenditures are expected to double, reaching $20 billion for future projects.

Tesla has reported a 3% decline in annual revenue for the first time in its history, revealing total revenues of $94.8 billion for 2025. This drop coincides with the company’s shift towards artificial intelligence (AI) and robotics, notably planning to end production of its Model S and Model X vehicles. CEO Elon Musk indicated that the California factory, previously producing these models, will be repurposed for manufacturing humanoid robots under the brand Optimus, as the firm aims to position itself in this emerging market. Musk also noted that despite the revenue decline, Tesla's gross profits exceeded analysts' expectations in the last quarter, amounting to $5 billion, thus causing stock prices to rise post-announcement, according to South China Morning Post and BBC.

In light of this revenue downturn, Tesla's annual profit fell to its lowest level since the pandemic, dropping 46% to $3.8 billion. Analysts attribute this decline to heightened competition, particularly from Chinese company BYD, which has now claimed the title of the world's largest electric vehicle manufacturer. Musk's political activities have also faced criticism, impacting customer sentiment and sales. Moreover, investors are expressing increasing interest in Tesla's commitment to AI technology, with the company announcing a $2 billion investment in Musk's venture, xAI, despite shareholder abstention from a recent vote on such investments. This reflects a complex relationship between Musk's ventures and Tesla’s financial health, according to BBC and India Times.

Musk has disclosed that to support the AI and robotics transition, Tesla plans to double its capital expenditures to $20 billion in the coming year, focusing on developing technologies such as robotaxis. Despite the notable decline in revenue and profits, analysts still show optimism regarding Tesla’s future. They praise the company's endeavor to innovate and expand into AI-driven services, including plans to roll out robotaxi services in major cities such as Houston and Miami. However, this optimistic outlook is tempered by skepticism regarding the operational readiness of such services and other delayed promises from Musk. The sustainability of this investment shift while maintaining core vehicle production remains a critical concern for analysts, as highlighted by expert commentary on the brand’s competitiveness in a rapidly evolving market, according to South China Morning Post, BBC, and India Times.