Tesla’s Q1 Earnings: The FSD Admission That Sank the Stock

Tesla’s Q1 earnings looked strong on the surface—revenues up 16% year on year, gross margins beating expectations at 19.2% versus 15.5% expected, and free cash flow of $1.44 billion against a forecast of negative $1.86 billion. The stock initially jumped nearly 4.5%. But by the end of the earnings call, it had reversed course and closed down 0.33%. The reason, according to JJ, was what Elon Musk said—and didn’t say—about Full Self-Driving.

The FSD Confession

For years, Musk claimed that Tesla vehicles with Hardware 3 (HW3) had “all the hardware necessary, compute and otherwise, for full self-driving.” He repeated this claim in recorded statements: “All Tesla cars being produced right now have everything necessary for full self-driving. All you need to do is improve the software.” Seven years later, during the Q1 earnings call, Musk effectively walked that back. He said unsupervised robotaxi revenues “will not be super material this year” and pushed meaningful contributions to “next year”—the same “next year” promise he has made repeatedly. More tellingly, he acknowledged that scaling FSD robotaxi to a much larger scale doesn’t make sense right now, citing “major architectural software improvements” needed to further improve safety.