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Tesla's grip on the trillion-dollar club slipped after its stock price tumbled over 8% following a disappointing Q2 2025 earnings report. The Elon Musk-led EV giant closed Thursday at $305.30, triggering a market cap drop below the symbolic $1 trillion level.
The market reaction followed a clear revenue miss. Tesla reported a 12% year-over-year revenue decline to $22.5 billion, its sharpest drop in more than a decade. Net income shrank 16% to $1.17 billion. A weakening profit margin and declining vehicle deliveries fueled investor concerns. Tesla shipped just 384,122 vehicles during the quarter - a 14% drop compared to last year.
While the broader EV market is growing, Tesla’s slowdown tells a different story. Competition from low-cost Chinese brands is rising, and global EV incentives are shrinking. The U.S. tax credit of $7,500 for Tesla buyers will soon phase out, adding further pressure to meet delivery targets.
Elon Musk’s outlook didn’t help. During the earnings call, he warned of “a few rough quarters” ahead. He spent more time discussing robotaxis, full self-driving, and AI projects than vehicle sales, signaling a shift in the company’s direction. Analysts took note.
Tesla’s valuation now stands at nearly 143 times its projected earnings, far higher than the average of the Nasdaq 100. For many, this raises concerns over whether the stock still justifies its lofty pricing. Ross Maxwell of VT Markets called the performance “a clear wake-up” tied to weaker demand, lost incentives, and operational realignments.
Wall Street has reacted. Profit estimates for 2025 have been cut by nearly 30% in the past three months. According to Harshal Dasani from INVasset PMS, the bigger issue may be leadership distraction. He believes Musk’s divided attention and political involvement are hurting investor trust.
Tesla shares have now lost over 35% from their 2024 peak and remain the worst performer among the ‘Magnificent Seven’ tech stocks this year. Prashanth Tapse from Mehta Equities said ongoing global tariff wars and shifting EV policies are weighing heavily on Tesla’s model.
Still, not all outlooks are bleak. The production of a new, affordable model is expected later this year. Robotaxi expansion and rising FSD subscriptions could open new revenue streams. Tesla’s diversification into AI and robotics may also play a critical role in future earnings.
But risks remain. The stock’s technical chart shows a consolidation pattern, with no clear breakout. Analysts suggest a bullish reversal only if Tesla crosses the $336 level.
Until then, the market remains divided. Long-term believers may view this as a point of entry, while more cautious traders are waiting for more crosses in Tesla's foundation.
Also Read – What Is Elon Musk's Net Worth in 2025? A Deep Dive into the Billionaire's Fortune
