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Investing.com -- Gene Munster, Managing Director at Deepwater Management, provides insight into Tesla (NASDAQ:TSLA)’s earnings, which are scheduled for release later today. Munster anticipates a decrease in Tesla’s auto gross margins from 13.6% in December to 11-12% today. However, he doesn’t see this as a significant issue, emphasizing that Tesla’s investment case is more focused on 2026 and beyond, rather than on 2025.
Munster’s forecast follows his preview last Friday, where he suggested that Tesla’s 2025 earnings might be revised downward after the March earnings report. He noted that while 2025 might be a challenging year for Tesla, it lays the groundwork for a major rebound in 2026 and beyond. This is mainly due to Tesla’s potential in physical AI, a field where Tesla is seen as a leading player.
Deliveries, which account for approximately 75% of Tesla’s business, are expected to decline by around 10% in 2025, with June likely to be the most challenging month. However, a rebound is expected in 2026, driven by a 35% growth in deliveries. This growth is expected to be supported by an improving brand image, a more positive outlook for electric vehicles (EVs), and the launch of a new model.
Despite the anticipated soft revenue and declining automotive gross margins, Munster expects Tesla’s full-year non-GAAP EPS to be $2.00, compared to the Street’s estimate of $2.62. However, he notes that the company has sufficient cash to fund its transition toward real-world AI.
Looking ahead to 2026, Munster forecasts a significant recovery, with deliveries growing by 35% year-on-year. This growth is expected to be driven by easier comparisons, brand recovery, renewed EV demand, and the ramp-up in production of a more affordable model. He projects non-GAAP EPS of $3.00–$3.25 for calendar year 2026, still below the Street’s estimate of $3.60.
Munster believes that Tesla’s long-term investment case continues to hinge on its ability to solve for physical-world AI, autonomy, and robotics. He expects Tesla CEO Elon Musk to emphasize this point during the company’s upcoming conference call, describing 2025 as a "throwaway year" and setting the stage for a major rebound in 2026 and beyond.
Munster remains optimistic about Tesla’s ability to execute in the physical AI space. The path forward begins with a reacceleration in deliveries next year and proof-of-concept milestones in ride-sharing later this year. He believes that EV adoption will continue to gain momentum, especially as Tesla introduces more affordable models.
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