Tesla Investors Cling Desperately to Musk's Robotaxi Narrative
By Reuters | 26 Jan, 2026

Despite Tesla's falling auto sales and plunging profits, along with many missed targets for robotaxi deployment, shareholders look for signs of reality behind Musk's software-based growth narrative.

Tesla investors head into earnings on Wednesday looking for evidence that Elon Musk's long-promised self-driving bet is beginning to materialize even as results show growing strain on the company's electric-vehicle business.

Competition and brand controversy have pressured the EV business that brings in a majority of Tesla's revenue. The company's deliveries shrank in 2025 and fourth-quarter sales and adjusted profit are expected to have dropped 3.6% and 40%, according to data compiled by LSEG.

But much of Tesla's $1.49 trillion market value rests on Musk's vision for self-driving vehicles and humanoid robots.

"Investors are largely looking past the near-term fundamentals. Market sentiment is being driven by Tesla's broader autonomy ambitions, including progress on the robotaxi platform and anticipation of the Cybercab entering full production in 2026," said Matt Britzman, senior equity analyst at Hargreaves Lansdown, who personally holds Tesla shares.

With "earnings likely to look soft, keeping the narrative firmly anchored on future growth is crucial in supporting Tesla's still-lofty valuation," he said.

After missing earlier predictions that robotaxis using Model Ys would be operating widely in multiple U.S. metro areas by the end of 2025, Musk said last week that the robotaxi service in Austin, Texas, now accepts customers in vehicles without a human backup in the car — a milestone in its autonomous rollout. 

Insurer Lemonade said it would offer a 50% discount to Tesla drivers for miles driven with the Full Self-Driving (FSD) driver assistance software, and Musk also said he expects Full Self-Driving to receive regulatory approval in Europe and China by next month, a step that could open up large overseas markets and allow wider use of the software by individual owners.

The company also added to its monthly subscription some highway driver assistance features in North America that were previously included with a purchase, in a push to boost revenue from artificial intelligence-driven technology.

Investor questions show that progress on the purpose-built, fully autonomous Cybercab, due to launch this year, and Full Self-Driving are top of the mind for shareholders. 

"For 2026, you're essentially seeing if AI becomes revenue + profit, not just spend as it is mostly now," said Ken Mahoney, CEO of Mahoney Asset Management, which holds Tesla shares.

VEHICLE MAKING BUSINESS

Tesla's profit margins -- the fact that it can make a profit on EVs -- has long been core to its investor appeal, but this year the focus could turn to sales, after two years of decline.

Wall Street broadly expects Tesla to return to deliveries growth in 2026, with about an 8% rise. 

Automotive gross margin in the last quarter of 2025, excluding regulatory credits, of 14.3%, will likely be the lowest in three quarters, according to Visible Alpha estimates. Tesla's regulatory credit revenue also is dwindling.

"The key signal for 2026 is that Tesla is intentionally trading near-term automotive margin for fleet scale since Elon understands that the value of the platform is not maximizing per-unit vehicle profitability today but maximizing the installed base that can later be monetized through autonomy and software," said Shay Boloor, chief market strategist at Futurum Equities.

Musk may also report on sales of the newest Teslas, the lower-priced "Standard" versions of the Model 3 and Model Y, and he may take the opportunity to talk up Tesla's energy storage division, where revenue is expected to jump 44%, according to LSEG data.

(Reporting by Akash Sriram in Bengaluru; editing by Peter Henderson)