Tesla’s latest quarter has given investors plenty to worry about — and honestly, it’s starting to feel like the company’s momentum has ground to a halt. Revenue was down 12% year-on-year, gross margins are shrinking, and operating margin has slipped to just 4%. Free cash flow took a big hit, and the expiration of federal EV tax credits, plus new tariff headwinds, are stacking up as real threats to future growth. Despite beating revenue expectations by $0.4 billion, the underlying numbers don’t inspire much confidence.

The stock’s reaction says it all: down more than 4% after hours, and now off 18% year-to-date. For a company that once traded on wild growth and untouchable optimism, this is unfamiliar territory. Gone are the days when Tesla could miss on the fundamentals and have Elon’s bravado save the day on the earnings call. Investors now want to see results, not just promises of robotaxis and humanoid robots.

Where’s the bottom? That’s the tough part. Tesla’s valuation is still far from cheap, even after this year’s drop. If margins keep shrinking and sales growth stalls, there’s not much of a safety net. Institutional investors, who once looked past volatility for the promise of tech disruption, may become sellers if the narrative doesn’t turn around quickly. The 17% gross margin is at multi-year lows for Tesla, and at 4% operating margin, there’s little room for error.

The real risk here is that what once looked like short-term noise (chip shortages, factory slowdowns, regulatory headwinds) is now being baked into long-term expectations. If U.S. demand remains sluggish without the tax credit boost, and international expansion faces even more tariff pressure, Tesla’s bottom might still be further down. A major technical support level sits around $130–$140 — if that breaks, the next stop could be a full retracement to pre-2020 levels, especially if broader tech sentiment sours.

That said, Tesla is still a leader in EVs and battery tech, with an unmatched Supercharger network and global brand. But until margins stabilise and growth returns, the stock is likely to remain under heavy pressure. This is a “show me” story now — not a leap-of-faith one. For investors, the best move may be patience: don’t try to catch the falling knife, but keep Tesla on the watchlist for signs that operational discipline and demand are turning a corner. For now, the pain may not be over.