Electric vehicle (EV) maker Tesla reported a net income of $1.3 billion in the second quarter (Q2) of 2025, a 23% year-over-year (YoY) fall from the same period last year.

Total revenue for Q1 was $22.5 billion, a 12% YoY decline from $25.5 billion. Tesla’s earnings per share during the quarter came in at $0.40, down from $0.27 in the same period last year.

“We are in this transition period where we will lose a lot of incentives in the U.S. We probably could have a few rough quarters,” said Elon Musk, Co-Founder, CEO, and Director at Tesla.

The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $3.4 billion, a 7% decrease from $2.8 billion in the same quarter of the previous year. The adjusted EBIDTA margin stood at 15.1% at the end of Q2 2025.

Vaibhav Taneja, Chief Financial Officer at Tesla, referred to the One Big Beautiful Bill (Budget Reconciliation Bill) and its impact on the company. He said, “The One Big Bill has a lot of changes that would affect our business in the near term. The first among those changes is the repeal of the Inflation Reduction Act EV credit of $7,500 by the end of this quarter.”

Tesla has updated its entire automotive product portfolio. “Globally, we are seeing an increase in the number of test drives. We began production of the lower-cost model as planned in the first half of 2025.  However, given our focus on building and delivering as many vehicles as possible in the U.S. before the EV credit expires and the additional complexity of ramping a new product, the ramp will happen next quarter, slower than initially expected,” said Taneja.

The company reported an operating cash flow of $2.5 billion, along with $100 million in free cash flow, and $36.8 billion in cash and investments.

Tesla’s energy generation and battery storage business continued to show steady momentum, with revenue reaching $2.8 billion, a slight increase from last year’s ₹2.7 billion.

Musk said, “Energy is growing really well despite headwinds from tariffs and supply chain challenges. The Megapack is expanding its capacity quickly, and we have upgrades planned for the Megapack that will make it even better. We had another record Powerwall deployment in Q2. The current battery demand is enormous, and the way to think about it is that the U.S. sustained power output for the U.S. grid is around 1 TW, but average usage is less than half a terawatt.”

He added that the power projects can run 24/7 at full capacity if batteries are added to the mix. This would more than double the U.S.’s energy output per year with just the batteries.

Taneja claimed that the Budget Reconciliation Bill has adverse impacts for energy businesses, most notably on the residential storage segment, due to the early expiration of consumer credits by the end of this year.

“The challenges in the storage business, therefore, remain both from the bill and from the tariffs, and we are doing our best to try and manage through this, but we will see shifts in demand and profitability,” he said.

Tesla reported a net income of $934 million for Q1 2025, a 39% YoY drop. The decline in profitability was attributed to a broad operational transition involving a global production line switchover for its flagship Model Y, as well as a strategic push into artificial intelligence and energy solutions.