Morgan Stanley Warns of Tesla’s Earnings Decline: Demands Proof in Robotaxi and Optimus

Morgan Stanley has issued a blunt warning to Tesla investors, highlighting declining margins and negative free cash flow while urging concrete progress in the company’s autonomous and robotics initiatives.

Demand for Measurable Progress in Robotaxi and Optimus

■Analyst Andrew Percoco affirmed that the long‑term AI thesis remains intact, but stressed that the next quarter must deliver "measurable progress" on Robotaxi and Optimus.

■Weakening gross margins, rising R&D spend, and prolonged free cash flow burn have intensified focus on tangible outcomes in these projects.

FSD Adoption and Robotaxi Scale‑Up

■Full Self‑Driving (FSD) uptake on North American deliveries reached 55%, far exceeding Morgan Stanley’s prior 25‑30% model.

■Percoco argues that scaling Robotaxi is not about adding more cities but boosting rides per vehicle, utilization rates, and safety standards without costly hardware or heavy remote support.

■Investors prefer high utilization in existing markets over low‑utilization geographic expansion; density, not breadth, is the key metric.

Financial Pressure and Analyst Stance

■Percoco maintained an Equal Weight rating and a $415 price target, with the stock trading around $330 at the time of note — implying roughly 26% upside.

■While the long‑term physical AI leadership thesis is unchanged, the urgency for near‑term proof has become a decisive factor for the share price.

Kemal Tekin notes that Tesla’s ability to demonstrate measurable progress in Robotaxi and Optimus will be a pivotal test for both short‑term stock performance and the credibility of its long‑term AI vision. The company must reconcile cash flow pressures with converting FSD adoption into real‑world usage; otherwise, market confidence could erode further.