Tesla shares posted their strongest single-session gain in more than a year following the rollout of a significant update to its Full Self-Driving (FSD) software. The move re-ignites the autonomy story that has historically driven TSLA's premium multiple, even as the underlying business shows strain: FY2025 revenue came in at $94.8B, down 2.9% year-over-year, with gross margins at 18.0% and net margins compressed to just 4.1% — a notable squeeze relative to peak margins the company posted in prior years.
The FSD update matters because Tesla's bull thesis has long rested on the idea that autonomy is a high-margin software business layered on top of the EV hardware base. Any credible step toward a fully autonomous vehicle — or a robotaxi deployment — could re-price the stock toward that software-company multiple rather than an auto-manufacturer one. That software optionality is what separates TSLA from every other name in the EV space.
The bear tension is real, however. Revenue is contracting, EPS of $1.08 diluted leaves the stock trading at an extraordinarily rich multiple on current earnings, and prior FSD 'milestone' announcements have repeatedly failed to translate into regulatory approval or meaningful recurring revenue. The stock is still down for the month, suggesting this pop is happening against a backdrop of skepticism, not euphoria.
What to watch: whether the FSD update drives measurable subscription attach-rate growth or any regulatory signal on unsupervised autonomy in key states. A follow-through catalyst — a concrete robotaxi timeline or a Waymo-style partnership — would be needed to sustain the re-rating. Without it, the pop risks fading as fundamental headwinds reassert themselves.