Tesla shares increased by 3% in after-hours trading following the company’s announcement of earnings exceeding expectations. Tesla reported an adjusted earnings per share of $0.50 and revenue of $24.9 billion, surpassing estimates by $140 million, although revenue decreased by 3% year-over-year.<\/p>\n
The automotive segment’s revenue dropped by 11% compared to the previous year, while the energy sector experienced a 25% increase. Tesla’s operating margin declined by 50 basis points to 5.7%, as operating income decreased by 11%, offset by a 39% rise in operating expenses.<\/p>\n
Tesla’s free cash flow in the fourth quarter of 2025 was $1.42 billion, down from $3.99 billion the previous year. Regarding the Optimus humanoid robot project, Tesla announced progress and plans to unveil the Optimus Gen 3 in the first quarter of the year. The Gen 3 version will include major upgrades and is the first designed for mass production, with production set to begin before the end of 2026, aiming for a capacity of 1 million robots annually.<\/p>\n
The after-hours pop is tempting, but we see a classic case of a forward-looking story overshadowing weak current performance. With the earnings event now passed, we expect the high implied volatility seen leading up to the report to decrease significantly. This “volatility crush” makes newly purchased long options cheaper but will hurt those who bought them yesterday at peak prices.<\/p>\n
Traders bullish on the Optimus narrative should consider buying call options with expirations after the planned Q1 unveiling. We’ve seen in the past, like with the AI Day events in the early 2020s, that hype cycles can build into these announcements, creating upward price pressure. Buying calls now, after the initial volatility crush, could be a strategic way to play the run-up to the Gen 3 reveal.<\/p>\n
On the other hand, the fundamentals present a bearish case, with automotive revenue declining 11% in a market where we saw overall EV sales growth slow to just 25% in 2025, according to IEA data. With the stock still trading at over 55 times forward earnings, some traders will see this as an opportunity to buy puts. They are betting the weak free cash flow and compressed margins will eventually outweigh the robot hype.<\/p>\n
The conflict between the weak auto business and the Optimus story creates significant uncertainty. Current options pricing is implying a potential 12% move in the stock over the next month, making strategies like long straddles attractive for those betting on a big swing. Alternatively, traders who believe the stock will be range-bound as the market digests this news might consider selling iron condors to collect premium from the still-elevated volatility.<\/p>\n","protected":false},"excerpt":{"rendered":"
Tesla beats earnings estimates; shares rise. Energy revenue up, automotive down. Optimus Gen 3 robot previewed.<\/p>\n","protected":false},"author":62,"featured_media":0,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-40435","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t