Tesla Inc (NASDAQ:TSLA) reported fourth-quarter results on Wednesday that exceeded Wall Street estimates, signaling a pivot toward artificial intelligence even as its core automotive business faces sustained pressure.

The electric vehicle group share price edged up in premarket U.S. trading as the company posted adjusted earnings of $0.50 per share on revenue of $24.9 billion, surpassing Wall Street consensus estimates of $0.45 and $24.78 billion respectively.

A central highlight of the release was the board’s decision to invest $2 billion in xAI, Elon Musk’s artificial intelligence startup, as part of a broader push to integrate digital intelligence with physical hardware. Management described 2025 as a transformative period that saw the company’s “transition from a hardware-centric business to a physical AI company.”

While automotive revenues fell 11% year-over-year in the quarter, the company’s energy storage division reached record deployments of 14.2 gigawatt-hours. Tesla noted that its vertical integration allowed it to “identify the limiting factor and develop bespoke and scalable solutions” across its various product lines.

The company also highlighted the removal of safety monitors from its Robotaxi fleet in Austin, marking a significant milestone in its autonomous driving roadmap. This shift is intended to unlock the expansion of coverage areas across the Austin metro as the service transitions to a fully unsupervised model.

Operational efficiency provided a silver lining as total unadjusted gross margins climbed to 20.1% despite the decline in vehicle deliveries. Tesla expects to ramp six new production lines for vehicles, robots, and batteries in 2026 to support its next leg of growth.

Capital expenditures remained high at $8.5 billion for the full year as the company scales its “Cortex” AI training clusters in Texas. Tesla intends to “maximize capital efficiency by scaling training compute judiciously” as demand for its AI-related offerings increases.

The humanoid robot program, Optimus, remains a key long-term catalyst with a third-generation design scheduled for unveiling in the first quarter of this year. This new iteration is intended for mass production, with the company aiming for an eventual capacity of one million robots per year. “First generation production lines for Optimus are being installed in anticipation of volume production,” management stated. 

Tesla, which has fallen from its perch as the world’s largest EV firm, ended the year with $44.1 billion in cash and investments. Investors now turn their attention to the upcoming production ramps of the Tesla Semi and Cybercab, both scheduled for the first half of 2026.

“While we continue to believe that Tesla will grow its broader AI related businesses over time (with the company having competitive strengths in our view including with its data access, engineering capabilities, and vertical integration/cost), we also expect competition to moderate the degree of profit growth,” analysts at Goldman Sachs said in a note.