Last year was a mixed bag for Tesla (TSLA 2.47%) investors. The good news is that shares of the country's leading producer of electric vehicles (EVs) rose 11% in 2025. That follows a 63% jump in 2024, after more than doubling the year before.
However, the 11% move last year fell short of the market's 2025 return. Tesla was also one of the five "Magnificent Seven" stocks that couldn't beat the market last year. Still, Tesla stock has more than tripled in value over the past three years.
Coming through with a double-digit positive return last year is impressive, because -- and here comes the bad news -- Tesla itself had a pretty rough year. By the time Elon Musk's company announces its fourth-quarter results in two weeks, 2025 will be the first year of declining revenue in Tesla's publicly traded history. It will be the second straight year of sharply declining margins and earnings. Will the fundamentals catch up to the ascending stock, or will it be the other way around? Let's take a closer look at what the year ahead holds for Tesla and its investors.
Image source: Getty Images.
Driving into the new year
Last year was challenging for Tesla. The expiration of the $7,500 tax credit for electric vehicles (EVs) in the fall of 2025 was a blow to the industry in the U.S. market. EV sales have accounted for 12% of all domestic car sales in the third quarter, just ahead of the rebate expiration, but that may be the peak for some time. Many automakers have scaled back on release plans for EVs. In a sign of the times, China's BYD overtook Tesla in unit sales last year.
That doesn't mean 2026 will be another year of contracting sales and profitability for Tesla. Analysts are actually expecting a rebound on both ends of the income statement. The consensus calls for $107.5 billion in revenue in 2026, a nearly 14% jump from last year's haul. The bottom-line bounce should be even stronger. Wall Street pros are targeting a 32% increase to $2.17 a share.
NASDAQ: TSLA
Key Data Points
Where will the growth come from this year? It's hard to see it coming, at least initially, from its flagship cars. Its entry-level Model 3 and Model Y -- accounting for 97% of its 2025 deliveries -- are the two models for which most buyers qualified for the now-expired tax credit. The Cybertruck launched to plenty of fanfare in late 2023, but it's part of the other 3% of deliveries that include the higher-end Model S and Model X. As woith most electric pickup trucks, consumer demand just wasn't there. Tesla's energy generation and storage products, along with its services business, are growing at a double-digit rate. They're just starting to move the needle, probably playing a bigger role if Tesla does score double-digit top-line growth in 2025.
There are other potential game-changers on the horizon. Its robotaxi business has been slow to roll out, currently only available in Austin, Texas, and the Bay Area. That can change if its Full-Self Driving (FSD) platform becomes truly autonomous later this year. It keeps getting better with every passing update. Bulls argue that Tesla's move this week to make FSD solely a monthly subscription option for new drivers starting next month suggests that it's ready to unlock driver-free navigation. Bears counter that Tesla is making the move to avoid litigation from drivers who made costly one-time purchases for FSD if the platform doesn't live up to its promise.
There's still time for the bulls to win before 2026 crosses the finish line. If you think this year's outlook is promising, analysts expect revenue to accelerate to the high teens on record earnings in 2027. Its hard push into AI and consumer robotics can start to bear fruit then. It's hard to see Tesla having another off year if it can meet -- much less exceed -- the market's lofty expectations.
