Tesla (TSLA) reported fourth quarter earnings that topped estimates after the bell on Wednesday. The company also said its Optimus robots were on track for an end of year start of production.

For the quarter, Tesla reported revenue of $24.90 vs. $25.11 billion estimated, a 2.4% drop from a year ago. Tesla posted adjusted earnings per share (EPS) of $0.50 vs $0.45 expected, with operating income of $1.41 billion vs. $1.32 billion esimated.

Tesla reported Q4 gross margin came in better than expected at 20.1% vs. 17.1% estimated.

Tesla stock was up over 3% in after-hours trade.

"Preparations continue in North America for the production ramps of Tesla Semi and Cybercab, both commencing 1H26, and production of the next-generation Roadster," the company said in its shareholder deck, adding that it will ramp up 6 new production lines across all its products.

Tesla said it plans to unveil Optimus V3 in Q1 of this year, with start of production planned "before the end of 2026 and eventual planned capacity of 1 million robots per year."

Tesla noted it removed the safety driver from customer rides on a limited basis for its robotaxi service in Austin, but didn't give a timeline for when they would all be removed, or what's next in terms of new robotaxi rollout.

Tesla said FSD subscriptions doubled in 2025, and it is still "pursuing regulatory approval in China and Europe.

Tesla also said it would invest $2 billion in preferred shares of xAI, CEO Elon Musk's AI startup that owns X.com.

Tesla’s drop in sales and profits comes as its bread-and-butter EV business sputters.

Earlier this month, Tesla reported Q4 global vehicle deliveries of 418,227, a 15% drop from the 495,570 vehicles it delivered in the same period last year.

For the full year, Tesla delivered 1.64 million vehicles, in line with expectations and an 8% drop compared to 2024. This marked the second straight year of annual sales declines for the EV maker.

Cheaper vehicles like the standard versions of the Model Y and Model 3 couldn’t blunt several large headwinds. The loss of the federal EV tax credit at the end of Q3 in the US, new EV competition from legacy auto brands, and CEO Elon Musk’s polarizing politics all played heavily into Tesla’s sales slide.

It is no wonder that investors are counting on initiatives like Tesla’s full self-driving software (FSD), robotaxi service, and Optimus robot as future catalysts for the stock.

“The major focus on the conference call will be the Robotaxi rollout across the US including the removal of safety drivers across its fleet, and we believe the Street is at a crossroads with Tesla as the bulls and bears debate how quickly the Robotaxi era will take shape over the coming year,” Wedbush analyst Dan Ives wrote on Tuesday.

Last week, Musk announced that Tesla removed the safety driver from its Austin, Texas, fleet for some vehicles, which Ives called an “important first step in its long-term vision for the Robotaxi.”

Other major questions surround robotaxi rollouts in new regions such as Arizona and Nevada, as well as the ultimate fleet size. Morgan Stanley predicts 1,000 Tesla robotaxis on the road by the end of the year.

Musk also announced the one-time fee for FSD would be going away in lieu of a subscription plan, which currently costs $99/month. Tesla also removed its Autopilot lane centering and adaptive cruise control feature in a bid to increase FSD adoption.

Musk said this month he sees Optimus sales starting next year, but the CEO is known for audacious product timelines.

Pras Subramanian is Lead Auto Reporter for Yahoo Finance. You can follow him on X and on Instagram.

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