Tesla's first quarter earnings beat Wall Street's expectations, with profits coming in 16% higher than the first quarter of last year. The results briefly sent the company's stock surging in after-hours trading.

But then CEO Elon Musk started off the quarterly earnings call with investors and analysts by reminding them that the company is planning significant expenditures. "We're going to be substantially increasing our investments in the future," he said, referring to the $25 billion the company plans to spend this year alone on AI software and chips, as well as more traditional manufacturing and design costs. That cautionary note dampened Wall Street's enthusiasm and erased the stock's bump.

The company's stronger-than-expected performance came despite a slowdown in Tesla's energy storage business — selling batteries that stay in one place, rather than batteries for vehicles. Tesla has also suffered a drop in revenue from regulatory credits. Rival automakers who are falling short of government requirements for fuel-efficient and zero-emission vehicles can pay Tesla to get "credit" for its zero-emissions vehicle production, off-setting their own gas-guzzlers — but the Trump administration's policy shifts make such purchases increasingly unnecessary.

Tesla's profits, while exceeding expectations, were not great by the company's own historical standards. In fact, this quarter Tesla clocked its second-worst net profits and vehicle deliveries out of the last 12 quarters, according to the earnings report; only the dismal results from the first quarter of 2025 were worse. But they came in well ahead of what Wall Street analysts had been bracing for.

Tesla says demand for its EVs is growing in some areas and the company is seeing a "rebound" in markets including North America. Higher car prices also helped drive profits this quarter. Tesla's U.S. car sales have slid or stagnated in recent years, thanks in part to Elon Musk's polarizing political activities, and more recently to a broader slump in U.S. EV sales.

"The fact remains that Teslas are still really good electric vehicles," Damon Bell, senior research editor at Cars.com, told NPR ahead of the earnings.

"The Model 3 and the Model Y are really kind of benchmark vehicles that are positioned right in that sweet spot," he said. "They still have a strong appeal."

The company also increased revenue in a category that includes Tesla's Supercharger vehicle charging network and subscriptions paid for the "Full Self-Driving (supervised)" software system, which can assist with driving tasks when monitored by a human.

But, as he has done on many recent earnings calls, Musk maintained that Tesla's long-term outlook depends not on anything as prosaic as car sales or charging revenue, but on artificial intelligence, humanoid robots and fully self-driving vehicles. Musk has repeatedly told investors to prepare for the company to pour massive quantities of money into such next-generation technologies, which may make future quarters look less rosy than this one.

"Tesla's not alone in this," Musk said. "I think you've seen most, if not all, [of] certainly the major technology companies substantially increasing their capital investments. And we're going to be doing the same. I think it's going to pay off in a very big way."

The company is currently operating a small number of fully autonomous robotaxis in Texas, and has promised a massive expansion. And Tesla discontinued its luxury Model S and Model X to free up those production lines to make the humanoid robot the company calls "Optimus." On the earnings call, Musk said Optimus will enter production this summer and start being useful "outside Tesla" next year.

"As you've heard me say a few times, I think Optimus will be our biggest product," Musk said. "I remain convinced of that conclusion."

And investors seem to agree with him; Tesla's sky-high stock price gives it a market capitalization of $1.45 trillion, more than five times larger than Toyota, the world's top-selling automaker.

On the afternoon of the earnings call, on the sunny rooftop of the Tesla Diner in Los Angeles, Optimus was nowhere in sight. The robot played a starring role at the diner's grand opening, and Tesla had recently teased on Musk's social media platform X that the robot was "returning to work." But on this Wednesday, the free popcorn at the diner was handed out the old-fashioned way: by a human. When asked where Optimus was, the staffer explained in long-suffering tones that the robots only appeared for special occasions.

For Jimmy Cho, a Tesla investor and fan visiting the diner on a trip to Los Angeles from Taiwan, Optimus' absence was "a little bit disappointing." But he's still all-in on Musk's vision for the company, citing "the Optimus robot and full-self driving and maybe the Cybercab" for why he's invested in the company.

His friend Allen Chiang, who was also a little let down not to see Optimus in action, acknowledged that Musk's timelines are notoriously unreliable. But eventually, he says, everything Musk has promised "will come true."

"I think Tesla will change the world of human beings," Chiang said.

And it's that belief, more than any quarter's revenues, that has kept Tesla's stock sky-high for years.