Tesla’s Q2 2025 results disappointed investors: revenue came in at $22.75 billion (down 11.2% year-over-year) and adjusted earnings per share were $1.34—both below analyst forecasts of roughly $22.9 billion and $1.50 EPS. Automotive gross margin slipped to 19.6%, down from 22.3% a year ago, and deliveries fell 13.5% to 384,122 units. Shares dropped about 6% in after-hours trading. What’s Driving Tesla’s Q2 Slump?Tesla has been cutting prices across its Model Y and Model 3 lineups to stimulate demand, but high interest rates and fierce competition, especially from China’s BYD have undercut margins. CEO Elon Musk, who had asserted in April that “sales had turned a corner,” maintained optimism on the post-earnings call, urging investors to focus on long-term growth. Analysts Weigh In“Tesla’s pullback this quarter reflects both macro headwinds and the need for new, more affordable models,” says Shawn Campbell, adviser at Camelthorn Investments. “You need two dots to draw a line. I don’t think you can get too excited yet until you have some confirmation (of a demand recovery).” Beyond the NumbersTesla’s energy storage and services segment grew 24% year-over-year, but it wasn’t enough to offset the automotive slowdown. On the Q2 webcast, CFO Vaibhav Taneja stressed that “we’re reallocating resources to accelerate next-generation products while driving greater operational discipline.”Looking AheadTesla reiterated its full-year delivery target of 1.65 million units and forecast modest production growth in Q3. With competition intensifying and margins under pressure, the EV pioneer’s ability to launch a budget model and stabilize prices will be crucial to sustaining its market lead.