Tesla released its second-quarter financial report for 2026 on Wednesday, surpassing analysts’ revenue expectations. However, due to increased investments in artificial intelligence (AI), autonomous driving, and robotics fields, capital expenditure surged, resulting in negative free cash flow for the first time in over two years. Adjusted earnings per share also fell below market expectations.
After the financial report was released, Tesla’s stock price fell by approximately 4% in after-hours trading.
In the second quarter, Tesla’s revenue reached $28.24 billion, exceeding the market’s expectation of $25.71 billion and representing a 26% increase from the same period last year.
However, adjusted earnings per share were $0.33, lower than analysts’ forecast of $0.51. The free cash flow for the quarter was -$1.1 billion, while capital expenditure increased by 142% from the same period last year to $5.79 billion, with funds primarily directed towards AI computing power, autonomous driving, robotics, and related manufacturing infrastructure.
Tesla CEO Elon Musk remarked during the earnings call, “This year is a year of extremely high capital expenditure, but I am confident that everything we are investing in will result in amazing returns.”
The conflict in Iran has driven up fuel prices, boosting demand for electric vehicles in Europe and elsewhere. In the second quarter, Tesla delivered 480,126 vehicles, surpassing the 384,122 vehicles delivered in the same period last year and setting a quarterly record.
However, profitability in the automotive business continued to be under pressure. The average revenue (average selling price) per vehicle decreased from $45,345 in the same period last year to $42,730. Income from selling “regulatory credits” to other automakers that fall short of emission standards also dropped by about two-thirds from the same period last year to $146 million.
Tesla’s automotive business gross margin declined to 16.3%, below analysts’ expected 18.04%. Additionally, with increased investment in AI and other research and development projects, operating expenses grew by 47% to $4.35 billion, leading to a substantial drop in operating profit margin from 4.1% in the same period last year to 1.4%.
While profitability in the automotive business is challenged, Tesla’s energy storage and software business segments are becoming vital pillars of support.
In the second quarter, deployed energy storage products reached 13.5 gigawatt-hours (GWh), surpassing 8.8 GWh in the first quarter and 9.6 GWh in the same period last year.
Tesla stated that approximately 1.48 million active subscriptions for the “Full Self-Driving Supervised” system were maintained, marking a 56% growth from the same period last year. This system still requires human drivers to be ready to take control of steering or braking at any time.
In April this year, Tesla was authorized to deploy FSD in the Netherlands, and several other European countries have since allowed the use of this technology. The company is also seeking approval in China.
Musk is currently shifting Tesla’s focus from car sales to AI, autonomous driving, and robotics businesses. Key projects include the Cybercab autonomous taxi and the Optimus humanoid robot.
Tesla announced that the first batch of Optimus production lines is being installed and will commence production soon. However, the initial robots will be used for data collection and further feature development rather than being delivered for customer use.
Musk stated, “This will be the most challenging product to scale production for in Tesla’s history because everything on the robot is brand new.”
He added that the product has “no existing supply chain.”
Tesla has begun production of the two-seater autonomous vehicle Cybercab, although it remains unclear when the vehicle will be deemed safe enough for personal use.
Musk mentioned that the Cybercab will utilize SpaceX’s Starlink for network connectivity. SpaceXAI (formerly xAI) is also developing an AI model to serve as the “manager” for Optimus.
Despite a more than 15% decline in Tesla’s stock price this year, the company’s market value stands at around $1.4 trillion, maintaining its position as the world’s most valuable automaker. This reflects investors’ long-term expectations for its AI vision.