TSLA stock price: Why Tesla stock is surging today – strong earnings, $2 billion xAI investment, and Cybercab production outlook

TSLA stock price: Tesla (TSLA) shares rose more than 3% in after-hours trading Wednesday after the company announced a $2 billion investment in CEO Elon Musk’s artificial intelligence company, xAI, while confirming that production plans for its Cybercab robotaxi remain on track for this year, as per a report.

TSLA Stock Rises After $2 Billion xAI Investment – Elon Musk’s Pivot to AI and Robotics Supports $1.5 Trillion Valuation

The move underscores Musk’s plan to pivot Tesla from a traditional electric vehicle maker into a broader AI and robotics company, a shift that underpins the company’s roughly $1.5 trillion valuation, as per a Reuters report.

Tesla Earnings Impact: Analysts Remain Cautious Despite Rally

Despite the rally, some analysts and investors remain cautious, noting Tesla’s history of missing production launch targets.
Thomas Monteiro, senior analyst at Investing.com, pointed out that Tesla is “entering a transition phase” where it is asking investors to underwrite potential revenue from self-driving software in its cars and robotaxi business before auto sales recover, as quoted by Reuters. Monteiro added, “(That) makes rollout metrics – not deliveries – the most important leading indicator from here,” as quoted in the report.

Also read: Meta stock today surges over 9% after Meta earnings beat estimates and AI spending outlook boosts investor confidence

Tesla Revenue Declines 3% in 2025 Amid Market Headwinds

Tesla’s core vehicle business, which still accounts for most of the company’s revenue, has faced headwinds from competitors rolling out newer, lower-priced models. The expiration of US electric vehicle tax incentives and Musk’s controversial political rhetoric have also affected demand. Revenue fell about 3% to roughly $94.83 billion in 2025, marking Tesla’s first annual decline.
To defend sales volumes, Tesla has leaned heavily on discounts and lower-priced versions of its best-selling vehicles. Analysts expect the company to deliver 1.77 million vehicles in 2026, an 8.2% increase from last year.

TSLA Earnings: Automotive Margins Climb Despite Falling Revenue

Despite the revenue decline, Tesla’s automotive gross margin, excluding regulatory credits, came in at 17.9%, up from 13.6% a year earlier and well above the expected 14.3%.

Also read: MSFT stock price today: Why is Microsoft stock falling despite strong earnings? Here’s what’s worrying investors

Tesla Energy Business Grows 25.5%, Boosting Investor Confidence

Meanwhile, Tesla’s energy generation and storage business showed significant growth, with revenue rising 25.5% to a record $3.84 billion in the December quarter, surpassing analyst expectations of $3.46 billion, as per the Reuters report. The segment benefited from strong demand for grid-scale batteries used to support renewable energy and stabilize power networks.

Tesla Stock Outlook: Full Self-Driving and Robotaxi Rollouts in Focus

Investors are closely watching progress on Tesla’s Full Self-Driving (FSD) and Cybercab robotaxi initiatives. The Cybercab, designed without a steering wheel or pedals, will be added to Tesla’s existing robotaxi service using Model Y vehicles and will also be available for consumers to buy.

Tesla Stock Price: Regulatory Limits and Production Timelines for Cybercab

While Musk acknowledged last week that the initial production of the Cybercab and the humanoid robot Optimus would be “agonizingly slow” before ramping up, leaving investors eager for more detailed timelines.

Regulatory limits also pose challenges: federal rules currently allow only 2,500 vehicles annually to deviate from standard vehicle design requirements, although legislation under consideration could increase this cap.

Musk has repeatedly set ambitious robotaxi timelines, initially aiming to reach half of the US population by the end of 2025, before narrowing the goal to the top eight to 10 metropolitan areas. He has continued to highlight rapid progress for Full Self-Driving but has not provided firm dates for regulatory approval or unsupervised deployment.

FAQs

Why did Tesla shares rise after hours?
Tesla announced a $2 billion investment in Elon Musk’s AI company xAI and confirmed Cybercab production plans for this year.

What is Tesla’s plan with xAI?
Musk is pivoting Tesla toward AI and robotics, aiming to expand beyond electric vehicles.