Published Thu, Jul 23, 2026 · 07:23 AM
[AUSTIN] Tesla missed Wall Street’s profit estimates even after a strong quarter of auto sales, a setback for the electric vehicle maker as it looks to build out new lines of business in robotics, autonomy and artificial intelligence.
Adjusted earnings were US$0.33 a share in the second quarter, the company said on Wednesday (Jul 22) in a statement.
That was well short of the US$0.51 average of analyst estimates compiled by Bloomberg. It also reported its first quarter of negative free cash flow in more than two years, burning through US$1.09 billion.
Tesla chief financial officer Vaibhav Taneja reiterated that spending in 2026 will total more than US$25 billion.
That total will continue to grow in the coming years, he said during the company’s conference call, as Tesla looks to increase production of cars, batteries and robots across half a dozen plants.
Tesla reported capital expenditures of US$5.8 billion in the quarter. At that pace, Tesla would spend about US$17 billion this year – well below the company’s target.
This puts the EV maker in a bind as it tries to hit the ambitious targets it has promised to investors.
“Tesla is one of the few companies that should be spending more on AI, spending less for them is puzzling given how much their future is anchored on AI adoption into every part of their business,” said Max Gokhman, head of AI and digital asset solutions at Franklin Templeton.
The shares fell 4.2 per cent as at 6.02 pm in late trading in New York following the release. The stock has declined 17 per cent so far in 2026 through Wednesday’s close.
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Profit was impacted by lower average vehicle selling prices as the company offered incentives to entice buyers. Tesla also phased out the S and X models – two of its highest-price cars. Operating costs surged 47 per cent to US$4.35 billion.
Tesla, led by chief executive officer Elon Musk, also reported a decline in revenue from regulatory credits, which are payments it receives from other automakers that exceed emissions standards.
That revenue stream has dwindled as US President Donald Trump backs away from clean energy goals laid out under his predecessor.
Revenue was US$28.2 billion in the quarter, beating market expectations.
Earlier in July, Tesla reported it sold more than 480,000 vehicles in the second quarter, well above expectations. Cars remain Tesla’s most important business, while robotaxis and other projects still are not generating meaningful revenue.
“Tesla delivered its best-ever second quarter and first genuine revenue growth in over a year, yet the market keyed on a sharp profit miss,” Ivan Feinseth, an analyst with Tigress Financial Partners, said in a note.
While auto sales surged during the period, “that volume was bought with steep discounts, so profitability compressed”.
Subscriptions for full self-driving software rose to nearly 1.5 million, an increase of 56 per cent from a year earlier and a continuation of an upward trend.
The EV maker did not disclose new information about its nascent robotaxi ride-hailing business, which recently expanded to Miami, Orlando and Tampa after launching in Texas cities. Tesla also offers rideshare service under the same app in the San Francisco Bay Area, but the service is more akin to Uber and Lyft.
The robotaxi rollout has been slower than expected, sparking concern around Tesla’s ability to scale the service and compete with market leader Waymo.
Tesla had previously projected it would launch robotaxis in Phoenix and Las Vegas as early as the first half of 2026, but on Wednesday said preparations are still underway in the cities.
The market is still waiting for key details such as the number of vehicles in use and the total miles of driverless service without a human safety monitor in the car.
Tesla also did not give more information in the release about its purpose-built Cybercab, which went into production earlier in 2026.
David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, said his team is “increasingly looking past standard EV sales to judge Tesla as a real-world AI and robotics enterprise”.
“Its ultimate valuation hinges on the commercial execution of full self-driving, dedicated Cybercabs, Optimus humanoid robots, and high-margin megapack energy storage,” Wagner wrote in a note.
SpaceX IPO
The quarter included a significant milestone for another major Musk-run company when SpaceX went public in a record-setting offering.
The rocket launch company raised tens of billions of US dollars in the process on a wave of investor hype, turning Musk into the world’s first trillionaire, albeit briefly.
SpaceX shares have declined in recent weeks, pulling Musk’s wealth down with them.
There has been widespread speculation among investors that Tesla and SpaceX could merge in the near future thanks to shared ambitions in AI.
The release did not address the topic, but investors will be listening for any potential comments by Musk on the earnings conference call.
SpaceX already acquired Musk’s AI company, xAI – now SpaceXAI – in February.
And SpaceX and Tesla already do business together: Tesla sells megapack batteries and Cybertrucks to SpaceX, while the AI chatbot Grok is available in some Tesla vehicles. BLOOMBERG
