Tesla signage at the company’s store in Colma, California. (David Paul Morris/Bloomberg)
key takeaways:
- Tesla missed second-quarter profit expectations on July 22, reporting adjusted earnings of 33 cents per share despite strong vehicle sales and revenue of $28.2 billion.
- Tesla burned through $1.09 billion in free cash flow as operating costs increased by 47% and capital expenditures reached $5.8 billion.
- While investors await details on planned investments and robotaxi expansion, preparations are still underway in Phoenix and Las Vegas.
Tesla Inc missed Wall Street’s profit expectations despite a strong quarter of auto sales, a blow to the electric vehicle maker as it looks to build new lines of business in robotics, autonomy and artificial intelligence.
Second-quarter adjusted earnings were 33 cents a share, the company said in a statement July 22. That was well below the 51-percent average of analyst estimates compiled by Bloomberg. It reported its first quarterly negative free cash flow in more than two years, burning through $1.09 billion.
Tesla CEO Elon Musk has warned that total spending this year will exceed $25 billion, and the company is considering increasing production of cars, batteries and robots at half a dozen plants as it pursues its vision for the future. The impact of that investment is now visible in the company’s financial position, so investors will want more details.
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Tesla reported capital expenditures of $5.8 billion in the quarter. At that pace, Tesla will spend about $17 billion this year — well below the company’s target. This puts the EV maker in a tight spot as it tries to achieve the ambitious targets it has promised investors.
Max Gokhman, head of AI and digital asset solutions at Franklin Templeton, said, “Tesla is one of the few companies that should be spending more on AI; for them to be spending less is puzzling given how much their future depends on AI adoption in every part of their business.”
Shares fell 2.4% at 4:46 p.m. in late trading in New York following the release. The stock has fallen 17% this year through July 22.
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Profits were hit by lower average vehicle selling prices, while operating costs rose 47% to $4.35 billion. Tesla also reported a decline in revenue from regulatory credits, which are payments it receives from other automakers that exceed emissions standards. That source of revenue has diminished as President Donald Trump has backed away from clean energy goals set under his predecessor.
Revenue for the quarter was $28.2 billion, which was better than market expectations. Earlier this month, Tesla reported it sold more than 480,000 vehicles in the second quarter, more than expected. Cars remain Tesla’s most important business, while robotaxis and other projects are still not generating meaningful revenue.
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Subscriptions for full self-driving software increased to nearly 1.5 million, a 56% increase from a year ago and continuing the 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 in the San Francisco Bay Area under the same app, but the service is similar to Uber and Lyft.
The robotaxi rollout has been slower than expected, raising concerns about Tesla’s ability to scale the service and compete with market leader Waymo. Tesla previously estimated it would launch robotaxis in Phoenix and Las Vegas in the first half of 2026, but said on July 22 that the cities were still in preparation.
The market is still waiting for key details such as the number of vehicles in use and the total miles driven in driverless service without human safety monitors in the car.
spacex ipo
The quarter included a significant milestone for another major company run by Musk when SpaceX went public in a record-setting offering. Fueled by investor enthusiasm, the rocket-launch company raised billions of dollars in the process, making Musk the world’s first trillionaire, if only for a short time. SpaceX shares have fallen in recent weeks, reducing Musk’s wealth.
There is widespread speculation among investors that Tesla and SpaceX could merge in the near future due to shared ambitions in artificial intelligence. The topic is not addressed in the release, but investors will listen for any potential comments from Musk on the earnings conference call.
SpaceX has already acquired Musk’s artificial intelligence company, xAI, now SpaceXAI, in February. And SpaceX and Tesla already do business together: Tesla sells Megapack batteries and the Cybertruck to SpaceX, while AI chatbot Grok is available in some Tesla vehicles.
