Tesla (TSLA 0.24%) finished 2025 with another winning performance, albeit at a more muted pace. The electric-vehicle (EV) stock was up 11% last year. But over the past decade, as of Jan. 15, it's up a jaw-dropping 3,130%, which helps to explain its massive market cap of $1.4 trillion. This is one of the most valuable companies in the world.
The shares aren't cheap at all, unsurprisingly. Investors who want to own the business must be comfortable paying a price-to-earnings ratio of 292. That's a sky-high valuation that makes it clear that the market has huge expectations about what the future holds.
It's important that the company makes progress in critical areas. Here's are two things Tesla needs to prove in 2026.
Image source: Tesla.
1. Progress with robotaxis is key
Tesla is a story stock, thanks to its founder and CEO, Elon Musk. He continues to convince the market that the company will look dramatically different in the future from how it does today. The belief is that Tesla will conquer full self-driving technology and bring its robotaxi service to the masses.
Last year, the business finally took the first step toward this mission when it launched in Austin, Texas, in a very limited capacity. In 2026, Tesla needs to enter new cities and grow adoption, while expanding Cybercab production.
Investors are probably concerned about Nvidia's recent revelation at CES 2026 in Las Vegas that it's working on Alpamayo, its ecosystem of artificial intelligence (AI) tools to support autonomous driving tech. Selling this platform to other carmakers to use could ultimately limit Tesla's ultimate growth potential.
Tesla will be better served by simply focusing on what it can control, and that means further developing its own software. However, progress will depend on having external factors, such as regulations and consumer perception, work to its benefit as well. Tesla will need to take a big step forward in this area in 2026.
NASDAQ: TSLA
Key Data Points
2. Focus on the core business
Tesla's valuation reflects where the market's focus is, which is the company's autonomous-driving technology ambitions. However, if you view the business with clear eyes today, it's obvious that Tesla is still a manufacturer of EVs. These operations have pumped the brakes, as automotive deliveries slipped 9% year over year in 2025. Margin has also come down.
On the macro front, higher interest rates make new cars more expensive. The expiration of the EV tax credit doesn't help. And when it comes to competition, Tesla has never had to deal with such a crowded market. Getting the core business on better footing, with top-line growth and margin improvements, is what shareholders want to see in 2026.
