|
Thanks for reading The Briefing, our nightly column where we break down the day’s news. If you like what you see, I encourage you to subscribe to our reporting here.
Greetings! This really isn’t Elon Musk’s week. On Tuesday, President Trump made the (obviously unserious) comment about looking into deporting Musk, who has renewed his criticism of Trump’s Big Beautiful Bill. On Wednesday, Tesla reported that vehicle deliveries fell 13.5% in the second quarter, a slightly greater decline than it sustained in the first quarter. Wednesday’s report suggests the first-quarter auto revenue drop of 20% is likely to be repeated in the second quarter. That in turn raises the question of whether Tesla’s full-year revenue is likely to decline more than investors expect. By the end of Tuesday, analysts were, on average, estimating revenue would fall 1.5% for this year, according to S&P Global Market Intelligence. Analysts have been cutting estimates steadily, including today—the estimated decline was 0.7% on Tuesday morning. Still, even a 1.5% drop seems too low. Tesla’s top line includes energy generation, services and other items, but auto sales accounted for about 70% of revenue in the first quarter. Even with energy revenues surging 67% in the first quarter, the 20% decline in auto dollars meant that overall revenues fell 9%. Let’s assume Tesla posts a similar decline in the second quarter. That would mean the second half of the year would have to show blockbuster growth for revenue to come in flattish for 2025 overall. But a second-half sales turnaround seems unlikely—particularly given that Trump is ending tax credits for electric cars (effective Sept. 30, at least in the current version of the legislation). Also, Musk is now unpopular with both Republicans and Democrats: Trump’s Tesla boosterism of early March has given way to Trump dissing electric vehicles this week. If revenue does fall meaningfully for the year, then net profit will likely drop sharply: It fell 71% in the first quarter. Of course, Musk could do another big round of cost-cutting to limit the bottom-line impact of weakening revenue. Musk, of course, is trying to focus everyone’s attention on robotaxis and to a lesser extent robots, and away from the falling sales of Tesla vehicles. But even if Tesla succeeds with robotaxis—and so far it has only launched a limited service in Austin, Texas—it will be a long time before robotaxi fares can offset a sales decline and ensure the company starts growing again. Musk has said robotaxis won’t have a meaningful effect on the business until the middle of next year. That may yet prove unrealistic. Musk said in January that 2025 was a “pivotal year” for Tesla, thanks to the launch of its self-driving cars. Given the state of things right now, 2025 may well be pivotal, but not in a good way. Has the tech industry ever witnessed such a divergence in employee experiences? On the one hand, specialized AI researchers are winning the lottery as AI recruiting wars rage out of control. On the other hand, big tech firms are cutting jobs, either to trim expenses to offset increased AI investment, or because AI reduces need for humans, or both. Microsoft today began cutting 9,000 jobs, or nearly 4% of its workforce, the second mass layoff in three months, following 6,000 cuts in April. Microsoft executives have told subordinates that they should use AI to increase productivity in sales, engineering and customer support, we’ve reported. Also on Wednesday, TikTok cut jobs in areas like TikTok Shop and trust and safety. Job security in tech is truly a thing of the past.
- OpenAI has increased the amount of compute capacity it plans to rent from Oracle as part of its Stargate data center plan, according to Bloomberg, a sign that the effort, which was announced in January, is progressing.
- Khosla Ventures filed securities paperwork indicating that it is targeting a fundraise of $3.95 billion across three new funds, slightly higher than a target reported last fall.
The Information Weekend covers what happens when Silicon Valley logs off—the trends and people shaping culture, technology and everything in between. Subscribe for free today. |
