Tesla burns $1.1 billion on AI bets as Musk pivots from cars to chips and robots

Tesla's revenues are up, but profits squeezed as Musk spends on AI

Tesla posted its financial statement for the second quarter of the year this afternoon. Earlier in July, we learned that the American automaker had had a good quarter in terms of sales, growing 25 percent year over year. Fans hoping that sales increase would result in a plenty profitable Tesla may be disappointed, though. Revenues are up but so are expenses, and the company's once-enviable double-digit profit margin has fallen to just 1.4 percent. Tesla brought in $20.5 billion from its electric vehicle business, a 23 percent increase year over year, and just $146 million came from automotive regulatory credits. Credits have been a key to Tesla's profitability in previous challenging quarters, but they were abolished in the United States with Musk's blessing in 2025. There was growth from its energy and storage business, which grew 13 percent year over year to revenues of $3.1 billion, but the most growth was in Tesla's services, which doubled, bringing in $4.6 billion. Tesla's shift from a one-time purchase to a monthly subscription for its much-criticized FSD partially automated driver assist -- something tied to CEO Elon Musk's gargantuan remuneration package -- was a big help here. Overall, total revenues were up 26 percent, to $28.2 billion. But the cost of doing business went up more. Tesla's operating expenses went up 47 percent to $4.4 billion, and income from those operations fell by 57 percent year over year to $398 million. The company is still profitable -- it generated $1.1 billion for the quarter, but that's 5 percent less than the same three months last year. In large part, that's because Tesla has been spending heavily. Its capital expenditures grew by 142 percent to $5.8 billion, and free cash flow is currently negative $1.1 billion. That's an 848 percent drop compared to last year, but Q2 2025 was barely positive either. For a more short-term comparison, Tesla ended last quarter with a free cash flow of more than $1.4 billion. It's also lost another $1.2 billion from its investments. Despite so much of Tesla's revenues coming from cars, then solar and batteries, its spending is not on developing a new line of cars or even finally making those solar roof tiles we were promised a decade ago. It's still all about AI, humanoid robots, and more robotaxi rollouts, despite a high preponderance of crashes in Texas, including one involving a teleoperator and a Houston tree stump. In its statement to investors, Tesla says that it anticipates beginning production for its humanoid robots later this year, and that robotaxi deployments are "in line in seven major metros," although it acknowledges that at least one of these requires the assent of California regulators, who we have seen are notably less permissive than equivalents in Arizona, Florida, Nevada, or Texas.

Tesla's revenues are bouncing back after a dismal two years

After a dismal two years of weakening demand, falling sales, and damage to its brand by Elon Musk's political activities, Tesla's road to recovery continues apace. On the heels of an impressive delivery report, the company released its earnings for the second quarter of 2026 -- giving us the latest glimpse at the EV company that Musk has said he wants to transform into a leader of AI and robotics. Despite that mission, Tesla remains a car company. And in the second quarter, it sold an impressive 480,126 vehicles, about a 25 percent increase compared to the second quarter of 2025. (For a direct-to-consumer company like Tesla, deliveries are a proxy for sales.) Tesla certainly did a good job shrinking its inventory, which is good for the balance sheet. But what about those numbers? Tesla said it earned $1.11 billion in net income on $28.2 billion in revenue in the quarter that ended June 30th. That's a 26 percent increase in revenue but a 5 percent increase in profits over the second quarter of 2025, when the company earned $1.17 billion in net income on $22.5 billion in revenue. Tesla exceeded revenue expectations from Wall Street, which assumed approximately $26.4 billion in revenue. Automotive gross margins, which measures revenue minus the direct cost of manufacturing the vehicle, remains an important number for Tesla. They fund the company's multi-billion dollar investments in AI, autonomous driving, and robotics, while also providing a buffer for Tesla to slash vehicle prices when demand slumps. In the second quarter, Tesla said its automotive gross margins were 16.3 percent, minus revenue from the sale of regulatory credits (a revenue stream that will soon cease to exist, after the Trump administration's elimination of penalties for automakers who exceed emission standards). That's up over the 15 percent margins in Q2 2025, but down from 19.2 percent in Q1 of this year. The earnings report is the latest evidence that Tesla was starting to turn the corner on a dismal two years of declining sales and falling profits. It also comes as the company faces tough questions about its slow progress in expanding its robotaxi operations. Tesla's autonomous vehicle project has fallen far short of Musk's prediction of covering 50 percent of the US population by the end of 2025. The company recently launched robotaxi operations in two Florida cities, Orlando and Tampa, but a crowdsourced tracker shows only a handful of cars were available. Tesla rolled out a new update to Full Self-Driving (v14 Lite) for its vehicle owners, bringing personalized driving preference learning to individual Teslas. But the number of crashes involving Tesla drivers using Autopilot and FSD continues to grow at an alarming rate, with Electrek reporting 207 crashes in May 2026 alone.

Tesla burns through a billion as Musk bets the farm on chips and bots

Tesla's investment bill ballooned in calendar Q2 as Elon Musk's biz entered what it calls its "largest and most exciting period of investment. The company has poured resources into AI silicon and robotics, with capex [PDF] more than doubling from $2.5 billion in the previous quarter to $5.8 billion. That left Tesla with negative free cash flow of $1.1 billion, down 848 percent year-on-year. It expects spending to keep rising and exceed $25 billion for the year. During the earnings call, Musk talked up Tesla's Terafab ambitions but gave little detail other than calling it an "amazing initiative" and confirming that equipment orders had been placed for the development fab in Austin. "It's intended to have lithography mask production, and then logic, memory and packaging, and chip testing all under one roof," he said. "So you can have a very fast iterative cycle." Musk acknowledged it was a "high-risk, high-payoff bet on AI chips." Musk said Terafab was essential to scaling Optimus because Tesla would otherwise be unable to secure enough AI chips, hence the prodigious expenditure. As for Tesla's automaker business, vehicle deliveries were up 25 percent year-on-year in Q2 to 480,126, and total automotive revenues surpassed $20 billion. However, operating margin fell to 1.4 percent from 4.1 percent a year ago. According to Tesla, it is "in its largest and most exciting period of investment" as it builds out the infrastructure needed to make good on Musk's many promises. "I think Optimus [Tesla's humanoid robot] will be the biggest product," Musk reiterated during the earnings call, before cautioning that "it is a very complex problem to solve." Tesla is also facing stiff competition from China, which is also talking up its humanoid robots. Musk claimed Optimus will be the first "able to do generalized tasks." Then there is the Robotaxi project, where the billionaire noted intense scrutiny from regulators "We're going as fast as humanly possible in scaling Robotaxi... while trying to ensure that we do not harm anyone at all and ideally do not even run over a pet," he said. In answer to a question regarding combining Tesla and another of Musk's companies, SpaceX, he acknowledged overlap between the two but said it wasn't possible to talk about a combination on the Tesla results call. He left it to Brandon Ehrhart, Tesla's general counsel, to say: "We continue to benefit from our relationship with SpaceX... They've been a great partner, and we have numerous beneficial transactions with them." Investors were not impressed. Shares in the company fell in after-hours trading, while another of Musk's companies, SpaceX, continued its downward trajectory, standing at just over $115 by yesterday's close, well below its $135 IPO price and a huge drop from its $225 high. ®

Elon Musk's Tesla posts cash burn as capex surges on AI, robotaxi push

July 22 (Reuters) - Tesla (TSLA.O), opens new tab reported negative free cash flow in the second quarter for the first time in more than two years as the Elon Musk-led EV maker accelerated spending on AI infrastructure, battery capacity, robotaxis and next-generation manufacturing. Tesla reported negative free cash flow of $1.1 billion, compared with analysts' expectation for cash burn of $3.3 billion, according to data compiled by LSEG. Tesla delivered 480,126 vehicles in the second quarter, above Wall Street expectations and up from 384,122 vehicles a year earlier. The company produced 451,758 vehicles, meaning deliveries outpaced production by more than 28,000 vehicles during the quarter, reversing the inventory build seen earlier in the year. Tesla also deployed 13.5 GWh of energy storage products in the quarter, up from 8.8 GWh in the first quarter and 9.6 GWh a year earlier. Its core automotive business remains under scrutiny as competitors introduce newer models, ⁠often at lower price points, while the company continues to rely heavily on its Model 3 compact sedans and Model Y SUVs for volume. Tesla has tried to stimulate demand through lower-priced trims, including stripped down, affordable versions of the Model 3 and Model Y late last year, and the launch this month of a six-seater variant of the Model Y in the United States, where demand has been hit by the removal of key tax credits last year. Wall Street expects Tesla to deliver about 1.7 million vehicles in 2026, according to Visible Alpha data. That would imply growth from last year's levels, but analysts remain divided over whether the second-quarter rebound reflects sustainable demand or timing effects after a weak first quarter. Analysts say sustaining the momentum could be difficult, with third-quarter growth set to ⁠face a high bar after a strong performance in the same period last year. Investors have increasingly turned their attention to Musk's push into self-driving technology and robotics, seeking clearer evidence that Tesla's autonomy narrative is shifting from promise to commercial reality. Tesla's energy generation and storage unit has emerged as a key counterweight to the auto business, helped by demand for grid-scale batteries that support renewable energy, data centers and electricity-network stability. Tesla has said ⁠it expanded its unsupervised robotaxi service in Austin and launched unsupervised rides in Dallas and Houston in April. The company also operates a robotaxi service in Miami, expanded the service to Orlando and Tampa. Tesla has previously identified Phoenix and Las Vegas among future expansion markets. The company received approval in ⁠April to deploy its advanced driver assistance software - called Full Self-Driving Supervised - in the Netherlands. Some other European countries have also allowed the technology following the Dutch approval. A key vote to decide on Europe-wide approval for the technology is expected later this year. Tesla is ⁠also pushing for approval in China. Tesla's shares have fallen more than 15% this year. At about $1.4 trillion, it remains the world's most valuable automaker by a wide margin, reflecting investor expectations that self-driving software, energy storage, robotaxis and humanoid robots could eventually deliver higher-margin growth than vehicle sales. Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Pooja Desai Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Disrupted * ADAS, AV & Safety * Software-Defined Vehicle * Sustainable & EV Supply Chain

Tesla's cash burn will test investor faith in its AI bets

Record deliveries meet a widening cash gap as robotaxi, Optimus, and a $25bn capital bill come due ahead of Wednesday's results. Tesla reports its second-quarter results on Wednesday, and the question hanging over the call is less whether it can still sell cars than how long it can keep spending faster than it earns. The company has just posted its best delivery quarter on record, yet Wall Street expects it to burn through roughly $3.25bn in free cash flow, a gap that measures the distance between Elon Musk's autonomy promises and the cost of funding them. Much of that cost is already committed. Tesla has lifted its 2026 capital budget to more than $25bn, up from around $20bn three months earlier, with close to $20bn of it earmarked for AI, spanning Dojo compute, a data-centre buildout, the Cybercab, and the Optimus robot. The deliveries were the quarter's clear positive. Tesla handed over 480,126 vehicles, up about 25% on a year earlier and well ahead of the roughly 406,000 analysts had modelled, its strongest three months yet. The gains lean heavily on price. Cheaper Model 3 and Model Y variants and a wider Full Self-Driving rollout in Europe drove the volume, with those two mainstream cars accounting for about 97% of the total. The problem is timing. The spending is front-loaded against revenue that has not arrived, and chief financial officer Vaibhav Taneja told investors in April that Tesla would run negative free cash flow for the rest of 2026. The projected minus $3.25bn for the second quarter would reverse a positive $1.4bn in the first. The scale of the commitment is the real shift. At more than $25bn, the 2026 budget runs at roughly triple Tesla's historical pace, recasting a carmaker that once prided itself on capital discipline as a capital-hungry AI and robotics platform. The autonomy business meant to justify the outlay is still small. Tesla's robotaxi service runs in Austin, Dallas, and Houston, and its fleet remains a fraction of Waymo's, with meaningful revenue not expected before 2027 at the earliest. Optimus sits further out again. Musk has cast the humanoid robot as Tesla's largest future product, but production is only starting to ramp and it adds nothing to current cash flow. Analysts are divided on whether the promise is worth the burn. Morgan Stanley's Andrew Percoco has called robotaxi scaling the "most important catalyst" for the stock, holding a neutral rating while raising his price target to $417, and UBS's Joseph Spak has kept a similarly cautious hold. The longer view is more generous. J.P. Morgan projects Tesla's revenue climbing from about $95bn in 2025 to roughly $203bn by 2030, driven by robotaxi and Optimus, though those forecasts rest on products that barely generate income today. The near-term picture is duller. Consensus points to revenue near $27.6bn, a gross margin around 19.5%, and adjusted earnings of about $0.55 a share, with automotive margins squeezed by cheaper Model 3 and Model Y variants that lifted volumes but not profit. Markets are braced for a sharp reaction either way. Options pricing implies a post-results move of around 7% in either direction, and the shares have drifted lower this year even after the record delivery figure. Energy storage remains a rare bright spot, with 13.5 GWh deployed in the quarter, up from 9.6 GWh a year earlier, though it is not yet large enough to offset the autonomy bill. Tesla still holds more than $40bn in cash, which buys time even as the outflows widen. Strip away the projections and the results describe a company in transition, funding a bet on machines that drive and work while its core car business grows more slowly and at thinner margins. Investors have largely priced the AI story as settled fact. That is why the forward guide will matter more than the quarter itself. Any hint that capex could rise again, or that robotaxi timelines are slipping, would test how much patience the current valuation assumes. Tesla reports after the closing bell on 22 July, with the earnings call scheduled for 5.30pm ET.

Tesla cash burn to test investor faith in AI bets

July 21 (Reuters) - Tesla (TSLA.O), opens new tab is expected to report its first quarterly cash burn in over two years on Wednesday, as its spending on AI and robotics soars, intensifying investor scrutiny over when those bets will pay off. CEO Elon Musk has pivoted the electric-vehicle maker's focus from manufacturing cars to building so-called physical AI businesses such as self-driving taxis and humanoid robots. Much of Tesla's valuation hangs on that promise. However, investors are growing increasingly uneasy as spending on AI infrastructure, including data centers, and manufacturing capacity is projected to climb to $25 billion this year, outstripping quarterly cash generated by Tesla's core automotive and energy operations. "As capex more than doubles and free cash flow turns negative, investors are increasingly focused on evidence that Tesla's spending is strengthening its physical AI moat," ⁠Morgan Stanley analysts wrote in a note. Investors have been betting that Tesla's autonomous-driving technology and robotics ambitions could eventually unlock new, high-margin revenue streams. But progress has been slower than many analysts expected, and Musk has missed some self-imposed deadlines. Soon after launching its robotaxi service in Austin, Texas, in April last year, Musk predicted Tesla robotaxis would serve half the U.S. population by the end of 2025. In January, Tesla said the service would expand to seven new cities in the first half of 2026. But its robotaxi network remains confined to Austin, Dallas, Houston in Texas, and Miami in Florida. Ahead of Wednesday's earnings call, the most-voted question on Tesla's investor-relations site, submitted by a retail investor, was: "What is keeping Tesla back from accomplishing these short-term goals that they've set for themselves?" Nine of the top 10 most-voted questions center around Tesla's AI-driven bets - robotaxis, Optimus humanoid robots and its Full Self-Driving technology. "Why ⁠has growth of robotaxi vehicles stalled? When will we see Cybercab start customer rides?" asked another retail investor. Tesla has said that it has started manufacturing its Cybercab vehicle, a tailor-made robotaxi without a steering wheel and pedals. However, the vehicles have not been deployed into a robotaxi network, with Musk saying that the production ramp would be "agonizingly slow." AUTO BUSINESS REBOUNDS Tesla delivered a record number of vehicles for the April-to-June period, far exceeding market estimates, as higher oil prices helped drive sales of EVs, ⁠especially in Europe. Analysts expect Tesla to deliver 1.7 million vehicles in 2026, up 3.9% from last year, which would snap a two-year skid of declining annual deliveries. Barclays analysts said investors remained focused on Tesla's AI ambitions, but a stronger automotive business would help generate the cash needed to finance those investments. For the second quarter, however, the ⁠vehicle-sales rebound may not be enough to offset heavy spending. Tesla is expected to report negative free cash flow of $3.3 billion, according to LSEG data. Analysts expect Tesla's second-quarter profit to come in at 50 cents per share, compared with 40 cents per share in the same period a year earlier. However, ⁠Deutsche Bank analysts expect the elimination of upfront Full Self-Driving software purchases earlier this year and low interest-rate financing in May to hit profitability. Wall Street expects automotive gross margin excluding regulatory credits of 18.1% in the second quarter, lower than 19.2% in the prior three-month period, according to Visible Alpha data. Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Mike Colias and Anil D'Silva Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Disrupted * ADAS, AV & Safety * Software-Defined Vehicle * Sustainable & EV Supply Chain Akash Sriram Thomson Reuters Akash reports on technology companies in the United States, electric vehicle companies, and the space industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a postgraduate degree in Conflict, Development, and Security from the University of Leeds. Akash's interests include music, football (soccer), and Formula 1. Abhirup Roy Thomson Reuters Abhirup Roy is a U.S. autos correspondent based in San Francisco, covering Tesla and the wider electric and autonomous vehicle industry. He previously reported from India on global corporations, capital markets regulation, white-collar crime, and corporate litigation. Contact him at (415) 941-8665 or connect securely via Signal on abhiruproy.10

Tesla's profits slide despite growing revenue as it pivots to robotics and AI

Shares in Elon Musk company fall more 3% in after-hours trading, as earnings per share miss Wall Street expectations Tesla reported its second-quarter earnings on Wednesday, disclosing far lower profits than expected. The company's already beleaguered stock, which had fallen around 14% this year to date, dipped further following the earnings report. Elon Musk's automaker, once the pinnacle of his tech empire, has taken a back seat to SpaceX. Musk's rocket and AI company held the largest stock market debut in history last month, turning the richest man on earth into the world's first trillionaire, though his net worth has since fallen from its peak. Tesla revealed earnings of 31 cents per share, a measurement of profits divided by the number of outstanding shares, less than the 51 cents per share Wall Street predicted. Its revenue was $28.23bn against an expected $25.71bn. Shares in the company fell over 3% in after-hours trading immediately after the numbers were released. Last year's second-quarter earnings were equally shaky. SpaceX and Tesla stock has slumped this year, with the rocket company down around 26% since its debut. Tesla has, meanwhile, suffered from the end of electric vehicle tax subsidies in the US last year and increased competition from cheaper Chinese automakers. Although Tesla missed revenue expectations in its last quarterly earnings report, the company revealed earlier this month that it exceeded Wall Street's predictions for its second-quarter auto sales. The stark turnaround was driven largely by sales in Europe, where electric vehicle subsidies are still in place and gas prices have surged as a result of the US-Iran war, leading consumers to buy electric. Tesla's vehicle sales are no longer as crucial to its market performance as they once were, however, as the company has pivoted towards bets on robotics, autonomous driving and AI. Musk claimed last year that Tesla's Optimus robot, which has not yet entered widespread production and already faces a slew of Chinese competitors, would be the biggest product of all time and end poverty. The company's driverless taxi service, Robotaxi, has become a major focus for Tesla as a potential new line of revenue. Tesla announced earlier in the week that it would add Tampa and Orlando to where Robotaxi can operate. The service is currently available in parts of Austin, Dallas, Houston and Miami. Musk has for years declared that the autonomous driving service will have almost infinite demand and claimed that millions of the self-driving cars would soon be on US roads. As is frequently the case with Musk's promises, he has failed to reach those lofty targets and rollout has been slow. Only around 50 Robotaxis now operate in Austin, where Tesla launched the service.

Tesla's push into AI and robotics is proving costly

Why it matters: CEO Elon Musk indicated he's "never been more optimistic about the future," but acknowledged the investments could lead to uneven results. Zoom in: Tesla revenue jumped on record vehicle deliveries in the second quarter, but the company saw a significant dip in operating profit because of its heavy spending on R&D. * Tesla plans to spend more than $25 billion on capital investments this year, and that spending rate will grow over the the next two or three years, CFO Vaibhav Taneja told investors and analysts on a call late Wednesday. * Additionally, Tesla plans to borrow as much as $30 billion to accelerate its investments in robotaxis, Optimus robots, semiconductors, solar manufacturing and AI compute infrastructure, he said. "We're investing a lot in growing the core business and really preparing for the future," Musk said on the call. "So this is a massive capex year, but I'm confident that all the things that we're investing in will yield incredible returns -- really, maybe the best capex returns that we've ever seen." By the numbers: Tesla reported Q2 revenue of $28 billion, up 23% year over year. * Net income was $1.1 billion, down 5% compared to a year ago, and essentially flat with the last three quarters. * Operating margin fell to just 1.4%, compared to 4.1% a year ago. State of play: Tesla began production of its driverless Cybercab in Texas during the quarter, but Musk said its Robotaxi service is rolling out cautiously to ensure safety. * Tesla Semi remains on track for production later this year at a new factory in Nevada, but Musk said autonomous trucking is not a priority until next year. * The company said it's making progress to expand battery pack manufacturing capacity, which it called "the main limiting factor to near-term vehicle production volume increase." * Tesla tore out assembly lines for its discontinued Model S and X cars at its Fremont, Calif., factory and expects Optimus humanoid robot production to begin there later this year. * Musk acknowledged that scaling Optimus production will be difficult. "This is going to be the hardest product to scale manufacturing that we've ever made at Tesla, because everything on the robot is new." The bottom line: Tesla's focus is always over the horizon.

Tesla plunges most in a year amid angst over AI spending

Tesla shares tumbled the most in over a year after disappointing quarterly results raised questions about Elon Musk's plan to refocus the electric vehicle maker on artificial intelligence and robots. Profit fell well short of Wall Street's estimates for the period as spending on its ambitious initiatives surged to $US5.8 billion ($8.3 billion), resulting in Tesla's first cash burn in two years. The company still expects capital expenditures in excess of $US25 billion this year, and executives are now predicting even larger outlays going forward.

Tesla shares crash 14%, Alphabet falls 6% as AI spending worries hit Wall Street

Tesla and Alphabet shares fell after quarterly results as investors overlooked robust revenue growth and focused on weaker margins, missed earnings and rising AI spending. The selloff highlighted Wall Street's growing demand for profitable AI investments with stronger near-term returns. Tesla and Alphabet shares fell sharply after their latest quarterly results, as investors looked past strong revenue growth and focused on weaker margins, missed profit estimates and rising artificial intelligence spending. Tesla shares dropped 14% after the electric vehicle maker reported second-quarter adjusted earnings of 33 cents per share, down 17.5% from a year earlier. The number missed the Zacks Consensus Estimate of 50 cents by 34%. US MarketsPowered By As on 23 Jul 2026, 08:28 PM IST S&P 500 Top Gainers United Rentals1,158(11.90%) Lockheed Martin569.85(10.79%) Allegion154.99(10.75%) Quest Diagnostics232.06(10.59%) Gainers" S&P 500 Top Losers Tesla323.99(-13.38%) Molina Healthcare193.58(-12.70%) Dover193.96(-9.59%) Rollins39.57(-8.97%) Losers" Revenue rose 25.5% year-on-year to $28.24 billion, ahead of the consensus estimate of $25.81 billion. The company was helped by record second-quarter vehicle deliveries and growth in its energy and services businesses. Tesla delivered 480,126 vehicles during the quarter, up 25% from a year earlier. Production rose 10% to 451,758 vehicles. Model 3 and Model Y deliveries increased 25% to 467,762 units, while deliveries of other models rose 19% to 12,364 vehicles. Automotive revenue rose 23% to $20.52 billion. Automotive sales increased to $20.01 billion from $15.79 billion, though leasing revenue fell to $364 million from $435 million. Regulatory credit revenue dropped sharply to $146 million from $439 million. Energy generation and storage revenue rose 13% to $3.14 billion. Services and other revenue jumped 50% to $4.58 billion, helped by used vehicles, Supercharging, service centres and insurance. But the market focused on profitability. Gross profit rose 23% to $4.75 billion, while gross margin narrowed to 16.8%. Operating expenses surged 47% to $4.35 billion, led by spending on AI, Cybercab, Optimus and Tesla Semi, along with higher stock-based compensation and sales costs. Operating income fell 57% to $398 million. Operating margin declined to 1.4% from 4.1% a year earlier. Tesla's software and energy metrics remained strong. Active paid Full Self-Driving subscriptions rose 56% year-on-year to 1.48 million. More than 55% of North American deliveries included an FSD subscription at purchase. Energy storage deployments rose 41% to 13.5 GWh. Also Read: Brent crude oil price surges past $100 as Houthi tanker attacks in Red Sea rattle markets Alphabet also came under pressure despite reporting a strong quarter. Shares fell more than 6% after the Google parent raised its capital expenditure guidance, adding to investor concerns about the cost of the AI buildout. Alphabet reported revenue of $119.8 billion, up 24% year-on-year and ahead of Wall Street's estimate of $116.5 billion. Google Cloud revenue rose 82% to $24.8 billion, beating expectations of $22.4 billion. Operating margin expanded to 34%. Still, investors reacted negatively after the company raised its 2026 capital expenditure guidance to $195 billion-$205 billion from the earlier range of $180 billion-$190 billion. Alphabet spent $44.9 billion on capex in the second quarter, double the amount spent in the same period last year. The reaction to both stocks shows the market's changing test for large technology companies. Strong revenue growth is no longer enough when investors are worried about the cost of AI, pressure on margins and the time it will take for new investments to produce returns. For Tesla, the issue was the earnings miss and margin contraction despite record deliveries. For Alphabet, the concern was whether heavy AI and cloud infrastructure spending will keep rising faster than investors expected. The selloff also shows that Wall Street is becoming more selective in the AI trade. Investors are still rewarding companies that can show clear AI-led revenue growth, but they are punishing those where spending is rising faster than near-term profit visibility.

Tesla earnings disappoint Wall Street as Elon Musk's AI push, pivot beyond cars hurt profits

Tesla's second quarter earnings missed profit estimates for the first time in over two years. The company reported negative free cash flow as AI and robotics investments accelerated significantly. Higher operating expenses and lower average selling prices also impacted Tesla's profitability. Despite record vehicle deliveries, investors expressed concern over the increased cash burn. Tesla shares experienced a decline following the announcement of these financial results. Tesla announced its second quarter earnings, with Elon Musk's EV maker failing to meet profit estimates for the first time in more than two years and reporting a negative free cash flow as the company accelerated its AI spending and robotics ambitions. Tesla shares dropped more than 4% in extended trading hours after profit miss and cash burn spooked investors, despite record vehicle deliveries as higher oil prices due to the raging conflict in the Middle East increased demand for electric vehicles. US MarketsPowered By As on 23 Jul 2026, 01:30 AM IST S&P 500 Top Gainers Super Micro Computer30.56(19.84%) Westinghouse Air Brake290.00(10.04%) Dell Technologies441.80(9.32%) EQT54.01(8.45%) Gainers" S&P 500 Top Losers GE Vernova985.03(-8.69%) Coterra Energy32.56(-8.62%) ServiceNow95.46(-6.47%) PTC113.11(-6.34%) Losers" What hurt Tesla's profit? World's richest man and Tesla CEO Elon Musk plans to spend more than $25 billion this year, which is almost triple of what it spent last year, as he bet on Tesla's AI-powered self-driving technology, robotaxis and humanoid robots over its core revenue generator, the auto business. Tesla's profitability was hurt by higher operating expenses due to AI, lower average selling prices and weaker regulatory credit revenue despite a rise in vehicle deliveries, the company said on Wednesday. Tesla's capital expenditures more than doubled on a year-on-year (YoY) as well as sequential basis to $5.8 billion in the June quarter, pushing free cash flow to a negative $1.1 billion. The cash burn was significantly higher than analysts' expectation of $3.3 billion. Also Read | Alphabet's quarterly earnings beat Wall Street estimates, but here's what is spooking investors Elon Musk is confident of incredible returns "This is a massive capex year, but I am confident that all the things that we are investing in will yield incredible returns," Musk told analysts on a post-earnings conference call. Investors are now increasingly turning their attention to Musk's push into self-driving technology and robotics, with the company expanding its unsupervised robotaxi services. "Monetization remains the central concern following the earnings miss. The question is how quickly those investments can begin supporting the valuation," said Ryan Lee, senior vice president of product and strategy at exchange-traded product firm Direxion, as per a Reuters report. Tesla's shares have fallen nearly 15% this year so far. At about $1.4 trillion, it remains the world's most valuable automaker by a wide margin, reflecting investor expectations that self-driving software, energy storage, robotaxis and humanoid robots could eventually deliver higher-margin growth than vehicle sales. Also Read | Kospi jumps 9% in 3 days after big crash. Is South Korea's stock market heading for another rally? (With inputs from agencies) (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Elon Musk's Tesla posts cash burn as capex surges on AI, robotaxi push

Tesla Inc.reported negative free cash flow of $1.1 billion in Q2 as heavy spending on AI, robotaxis and manufacturing weighed. Deliveries beat expectations, while energy storage surged. Investors remain focused on autonomy and robotics growth as core auto demand faces rising competition and pricing pressure. Tesla reported negative free cash flow in the second quarter for the first time in more than two years as the Elon Musk-led EV maker accelerated spending on AI infrastructure, battery capacity, robotaxis and next-generation manufacturing. Tesla reported negative free cash flow of $1.1 billion, compared with analysts' expectation for cash burn of $3.3 billion, according to data compiled by LSEG. Tesla delivered 480,126 vehicles in the second quarter, above Wall Street expectations and up from 384,122 vehicles a year earlier. The company produced 451,758 vehicles, meaning deliveries outpaced production by more than 28,000 vehicles during ⁠the ⁠quarter, reversing the inventory build seen earlier in the year. US MarketsPowered By As on 22 Jul 2026, 07:56 PM IST S&P 500 Top Gainers Super Micro Computer30.12(18.12%) Dell Technologies434.36(7.47%) EQT53.44(7.30%) Westinghouse Air Brake282.02(7.02%) Gainers" S&P 500 Top Losers Coterra Energy32.56(-8.62%) TE Connectivity191.68(-8.29%) GE Vernova1,005(-6.81%) PTC115.68(-4.21%) Losers" Tesla also deployed 13.5 GWh of energy storage products in the quarter, up from 8.8 GWh in the first quarter and 9.6 GWh a year earlier. Its core automotive business remains under scrutiny as competitors introduce newer models, often at lower price points, while the company continues to rely heavily on its Model 3 compact sedans and Model Y SUVs for volume. Tesla has tried to stimulate demand through lower-priced trims, including stripped down, affordable versions of the Model 3 and Model Y late last year, and the launch this month ⁠of a six-seater variant of the Model Y in the United States, where demand has been hit by the removal of key tax credits last year. Wall Street expects Tesla to deliver about 1.7 million vehicles ⁠in 2026, according to Visible Alpha data. That would imply growth from last year's levels, but analysts remain divided over whether the second-quarter rebound reflects sustainable demand or timing effects after a weak first quarter. Analysts say sustaining the momentum could be difficult, with third-quarter growth set to face a high bar after a strong performance in the same period last year. Investors have increasingly turned their attention to Musk's push into self-driving technology and robotics, seeking clearer evidence that Tesla's autonomy narrative is shifting from promise to commercial reality. Tesla's energy generation and storage unit has emerged as a key counterweight to the auto business, helped by demand for grid-scale batteries that support renewable energy, data centers and electricity-network stability. Tesla has said it expanded its unsupervised robotaxi service in Austin and launched unsupervised rides in Dallas and Houston in April. The company also operates a robotaxi service in ⁠Miami, expanded the service to Orlando and Tampa. Tesla has previously identified Phoenix and Las Vegas among future expansion markets. The company received approval in April to deploy its advanced driver assistance software - called Full Self-Driving Supervised - in the Netherlands. Some other European countries have also allowed the technology following the Dutch approval. A key vote to decide on Europe-wide approval for the technology is expected later this year. Tesla is also pushing for approval in China. Tesla's shares have fallen more than 15% this year. At about $1.4 trillion, it remains the world's most valuable automaker by a wide margin, reflecting investor expectations that self-driving software, energy storage, robotaxis and humanoid robots could eventually deliver higher-margin growth than vehicle sales.

Alphabet and Tesla shares plunge as runaway AI spending spooks investors

Shares of Alphabet and Tesla took a beating Thursday after the tech giants said they would ramp up their already breakneck pace of artificial intelligence spending - rattling investors who are increasingly wary of whether the massive bets will pay off. Tesla shares fell 10% and Alphabet sank over 5%. The dismal trading day comes after Alphabet shares already closed 1.5% lower on Wednesday and Tesla closed down 1.3%. Both companies warned of massive run-ups in spending: Alphabet raised its capital expenditure forecast for this year to $195 billion to $205 billion and said those figures could balloon even higher next year. The Google parent company previously projected capex between $180 billion and $190 billion. Tesla said its capex surged 142% in the second quarter to $5.79 billion from the prior yearly period. The company said it anticipates more than $25 billion in capex this year. At the same time investors have grown anxious about seemingly limitless AI spending, some companies have been hammered for not doing enough. Last week, for instance, IBM's stock suffered its worst trading day since 1968 after the company admitted it had "faltered" in its AI strategy. IBM CEO Arvind Krishna said the company "did not anticipate the magnitude of the capex reprioritization" that was happening across the tech industry. Top brass at both Tesla and Alphabet rushed to calm investor jitters about their nosebleed figures. "This is a massive capex year. I'm confident that all the things that we're investing in will yield incredible returns. Really, maybe the best capex returns that we've ever seen," Tesla CEO Elon Musk said on the earnings call on Wednesday, referring to capital expenditures, or spending. Musk - who's greatly skilled at getting investors optimistic about his lofty spending ambitions on moonshot projects - touted Tesla's future initiatives like its Optimus humanoid robot and semiconductor production efforts. Tesla is "installing the first-generation lines for Optimus," and will "start production soon," the company said in its earnings presentation. Alphabet's CEO Sundar Pichai meanwhile said his company's spending increase "is primarily due to an acceleration in the delivery of capacity to meet growing demand." The tech titan has stressed that it lacks the computing capacity to meet the AI demand that it is seeing. "Investors appear to be focusing on the sharp rise in capital expenditure, alongside a weaker margin outlook, while continued delays to Gemini 3.5 Pro and a lack of standout product releases have raised questions about whether Alphabet's AI investments are yet translating into a clear competitive advantage," Ben Barringer, head of technology research at Quilter Cheviot, told CNBC. The companies' earnings did have some bright spots. Both companies logged negative free cash flow for the second quarter. Some of Google's investments have shown signs of paying off with its cloud revenue jumping 82% to $24.8 billion, beating forecasts. "This is one of the strongest revenue growth quarters that Alphabet has had in five years, and Alphabet is a really great barometer for this whole AI wave," Alison Porter, portfolio manager at Janus Henderson, told CNBC's "Squawk Box Europe" on Thursday. "We think this look is ... very encouraging for overall AI capex and also for the returns that these platforms are seeing on that spend," Porter said. Tesla's automotive business logged $20.52 billion in revenue, up 23% year-on-year.

Tesla reports quarterly negative free cash flow for first time in over two years By Investing.com

Investing.com -- Tesla on Wednesday delivered a miss on quarterly profit but beat top-line estimates, as revenue in its core automotive business jumped more than 20% from a year ago. However, the electric vehicle maker reported negative free cash flow for the first time since Q1 2024 as it ramped up spending across all its businesses. The company's shares fell 2.7% after hours. Tesla's quarterly results come at a time when investors are closely watching the firm's progress in shifting from an EV manufacturer to a business focused on self driving, artificial intelligence, and robotics. The Magnificent Seven member's core automotive business had been hurting, with vehicle deliveries missing Wall Street expectations two quarters in a row, until this quarter, when deliveries came roaring back and posted their best growth since Q3 2023. That performance helped push Q2 2026 total automotive revenue to $20.52 billion, a 23% Y/Y increase. Automotive gross margin excluding regulatory credit sales improved 130 basis points Y/Y to 16.3%. Even as the rebound in its core unit is encouraging, much of Tesla's valuation is tied to anticipated returns from its Robotaxi business, self driving features, and Optimus general-purpose humanoid robots. Heading into the earnings report, Tesla was trading at 177 times forward earnings, the highest multiple among its Magnificent Seven peers. Speaking of the blue-chip club, Tesla stock has also been the second-worst YTD performer in the group, with shares down nearly 17%. The firm saw negative free cash flow of $1.1 billion in the quarter, at a time when it has outlined massive spending plans. Tesla in April had projected 2026 capital expenditures of over $25 billion, which top boss Elon Musk had said would be invested in core technologies, battery powertrain, artificial intelligence software and training, chip design, and increased manufacturing production. While not a major AI player such as Microsoft, Alphabet or Nvidia, Tesla's capex plans match an overall theme of mega-cap technology firms shelling out billions of dollars on AI infrastructure, or the combined hardware and software stack to handle massive data and computing power that is used to build and train AI processes. An uncertain timeline for returns on the soaring outlays has raised jitters among investors, leading to an overall hit to the U.S. technology sector and the high-flying AI trade since last month. "I think you've seen in most, if not all, certainly the major technology companies substantially increasing their capital investments. We're going to be doing the same. I think it's going to pay off in a very big way," Musk had told investors on the company's last earnings conference call in April. The company earned 33 cents per share on an adjusted basis on revenue of $28.24 billion for Q2 2026. Analysts had been expecting a profit of 49 cents per share on revenue of $25.55 billion. Tesla said its record quarterly deliveries, reported earlier this month at 480,126 vehicles versus estimates of about 406,000, was driven by record deliveries in several markets, including South Korea, Australia, and Japan. The EV maker also noted that battery pack capacity remained "the limiting factor on ramping our vehicle production globally" and that it was working on initiatives to increase that capacity. Looking at its robotics business, the company in the quarter decommissioned manufacturing lines for Model S and X vehicles at its Fremont facility and is installing first-generation lines for the Optimus robots, where production is expected to start soon. Turning to the Robotaxi, Tesla undertook engineering test drives of its Cybercab on public roads in the quarter and began offering employee rides in the vehicle on its Gigafactory Texas campus this month.

Tesla cash burn to test investor faith in AI bets

CEO Elon Musk has pivoted the electric-vehicle maker's focus from manufacturing cars to building so-called physical AI businesses such as self-driving taxis and humanoid robots. Much of Tesla's valuation hangs on that promise. Tesla is expected to report its first quarterly cash burn in over two years on Wednesday, as its spending on AI and robotics soars, intensifying investor scrutiny over when those bets will pay off. CEO Elon Musk has pivoted the electric-vehicle maker's focus from manufacturing cars to building so-called physical AI businesses such as self-driving taxis and humanoid robots. Much of Tesla's valuation hangs on that promise. However, investors are growing increasingly uneasy as spending on AI infrastructure, including data centers, and manufacturing capacity is projected to climb to $25 billion this year, outstripping quarterly ⁠cash ⁠generated by Tesla's core automotive and energy operations. "As capex more than doubles and free cash flow turns negative, investors are increasingly focused on evidence that Tesla's spending is strengthening its physical AI moat," Morgan Stanley analysts wrote in a note. Investors have been betting that Tesla's autonomous-driving technology and robotics ambitions could eventually unlock new, high-margin revenue streams. But progress has been slower than many analysts expected, and Musk has missed some self-imposed deadlines. Soon after launching its robotaxi service in Austin, Texas, in April last year, Musk predicted Tesla robotaxis would serve half the U.S. population by the end of 2025. In January, Tesla said the service would ⁠expand to seven new cities in the first half of 2026. But its robotaxi network remains confined to Austin, Dallas, Houston in Texas, and Miami in Florida. Ahead of Wednesday's earnings call, the most-voted question on Tesla's investor-relations site, ⁠submitted by a retail investor, was: "What is keeping Tesla back from accomplishing these short-term goals that they've set for themselves?" Nine of the top 10 most-voted questions center around Tesla's AI-driven bets - robotaxis, Optimus humanoid robots and its Full Self-Driving technology. "Why has growth of robotaxi vehicles stalled? When will we see Cybercab start customer rides?" asked another retail investor. Tesla has said that it has started manufacturing its Cybercab vehicle, a tailor-made robotaxi without a steering wheel and pedals. However, the vehicles have not been deployed into a robotaxi network, with Musk saying that the production ramp would be "agonizingly slow." Auto business rebounds Tesla delivered a record number of vehicles for the April-to-June period, far exceeding market estimates, as higher oil prices helped drive sales of EVs, especially in Europe. Analysts expect Tesla to deliver 1.7 million vehicles in 2026, up 3.9% from last year, which would snap a two-year skid of declining annual deliveries. Barclays analysts said investors remained focused on Tesla's ⁠AI ambitions, but a stronger automotive business would help generate the cash needed to finance those investments. For the second quarter, however, the vehicle-sales rebound may not be enough to offset heavy spending. Tesla is expected to report negative free cash flow of $3.3 billion, according to LSEG data. Analysts expect Tesla's second-quarter profit to come in at 50 cents per share, compared with 40 cents per share in the same period a year earlier. However, Deutsche Bank analysts expect the elimination of upfront Full Self-Driving software purchases earlier this year and low interest-rate financing in May to hit profitability. Wall Street expects automotive gross margin excluding regulatory credits of 18.1% in the second quarter, lower than 19.2% in the prior three-month period, according to Visible Alpha data.

Tesla profit disappoints as Elon Musk's AI spending surge leads to cash burn

Tesla on Wednesday missed analysts' profit forecasts for the second quarter and, for the first time in more than two years, reported negative free cash flow as the Elon Musk-led EV maker accelerated spending on infrastructure for its AI and robotics ambitions. Shares were down about 2.5% in extended trading. Musk plans to spend more than $25 billion this year, nearly triple last year's $8.53 billion, as he bets on Tesla's AI-powered self-driving technology and robotics, over its auto business, which still is the core revenue generator. But the pivot is expensive, and while much of Tesla's valuation hangs on the promise of potentially high-margin revenue streams, the spending is heightening investor scrutiny. Thomas Monteiro, senior analyst at Investing.com, said it could become difficult for Tesla to keep up with its recent capital-spending pace as its cash burn worsens. "Given that most of the Tesla premium rests on future narratives, every capex dollar Tesla commits will be judged more harshly than it was a year ago," he said. Adjusted profit in the quarter ended June 30 was 33 cents per share, versus analysts' average expectation of 51 cents per share, according to data compiled by LSEG. Tesla's profitability was hurt by higher operating expenses driven by AI, lower average selling prices and weaker regulatory credit revenue even as vehicle deliveries rose, the EV maker said on Wednesday. Capital expenditure in the quarter came in at $5.8 billion, compared with the expectation of about $6.2 billion. Tesla reported negative free cash flow of $1.1 billion, compared with analysts' expectation for cash burn of $3.3 billion. EV sales in the quarter helped assuage some fears for now. Tesla delivered 480,126 vehicles in the second quarter, above Wall Street expectations and up from 384,122 vehicles a year earlier. The Austin, Texas-based automaker reported revenue of $28.24 billion for the three months ended June 30, compared with analysts' average estimate of $25.71 billion. Automotive gross margin came in at 16.3%, compared with the expectation of 18.04%, according to Visible Alpha data. Tesla also deployed 13.5 GWh of energy storage products in the quarter, up from 8.8 GWh in the first quarter and 9.6 GWh a year earlier. Automotive business under pressure But the core automotive business remains under scrutiny as competitors introduce newer models, often at lower price points, while the company continues to rely heavily on its Model 3 compact sedans and Model Y SUVs for volume. Tesla has tried to stimulate demand through lower-priced trims, including stripped-down, affordable versions of the Model 3 and Model Y late last year, and the launch this month of a six-seater variant of the Model Y in the ⁠United States, where demand has been hit by the removal of key tax credits last year. Wall Street expects Tesla to deliver about 1.7 million vehicles in 2026, according to Visible Alpha data. That would imply growth from last year's levels, but analysts remain divided over whether the second-quarter rebound reflects sustainable demand or timing effects after a weak first quarter. Analysts say sustaining the momentum could be difficult, with third-quarter growth set to face a high bar after a strong performance in the same period last year. Investors have increasingly turned their attention to Musk's push into self-driving technology and robotics, seeking clearer evidence that Tesla's autonomy narrative is shifting from promise to commercial reality. Robotaxi expansion accelerates Tesla's energy generation and storage unit has emerged as a key counterweight to the auto business, helped by demand for grid-scale batteries that support renewable energy, data centers and electricity-network stability. Tesla has said it expanded its unsupervised robotaxi service in Austin and launched unsupervised rides in Dallas and Houston in April. The company also operates a robotaxi service in Miami and expanded the service to Orlando and Tampa, Florida. Tesla has previously identified Phoenix and Las Vegas among future expansion markets. The company received approval in April to deploy its advanced driver assistance software - called Full Self-Driving Supervised - in the Netherlands. Some other European countries have also allowed the technology following the Dutch approval. A key vote to decide on Europe-wide approval for the technology is expected later this year. Tesla is also pushing for approval in China. Tesla's shares have fallen more than 15% this year. At about $1.4 trillion, it remains the world's most valuable automaker by a wide margin, reflecting investor expectations that self-driving software, energy storage, robotaxis and humanoid robots could eventually deliver higher-margin growth than vehicle sales.

Elon Musk's Tesla posts cash burn as capex surges on AI, robotaxi push

July 22 (Reuters) - Tesla reported negative free cash flow in the second quarter for the first time in more than two years as the Elon Musk-led EV maker accelerated spending on AI infrastructure, battery capacity, robotaxis and next-generation manufacturing. Tesla reported negative free cash flow of $1.1 billion, compared with analysts' expectation for cash burn of $3.3 billion, according to data compiled by LSEG. Tesla delivered 480,126 vehicles in the second quarter, above Wall Street expectations and up from 384,122 vehicles a year earlier. The company produced 451,758 vehicles, meaning deliveries outpaced production by more than 28,000 vehicles during the quarter, reversing the inventory build seen earlier in the year. Tesla also deployed 13.5 GWh of energy storage products in the quarter, up from 8.8 GWh in the first quarter and 9.6 GWh a year earlier. Its core automotive business remains under scrutiny as competitors introduce newer models, often at lower price points, while the company continues to rely heavily on its Model 3 compact sedans and Model Y SUVs for volume. Tesla has tried to stimulate demand through lower-priced trims, including stripped down, affordable versions of the Model 3 and Model Y late last year, and the launch this month of a six-seater variant of the Model ?Y in the United States, where demand has been hit by the removal of key tax credits last year. Wall Street expects Tesla to deliver about 1.7 million vehicles in 2026, according to Visible Alpha data. That would imply growth from last year's levels, but analysts remain divided over whether the second-quarter rebound reflects sustainable demand or timing effects after a weak first quarter. Analysts say sustaining the momentum could be difficult, with third-quarter growth set to face a high bar after a strong performance in the same period last year. Investors have increasingly turned their attention to Musk's push into self-driving technology and robotics, seeking clearer evidence that Tesla's autonomy narrative is shifting from promise to commercial reality. Tesla's energy generation and storage unit has emerged as a key counterweight to the auto business, helped by demand for grid-scale batteries that support renewable energy, data centers and electricity-network stability. Tesla has said it expanded its unsupervised robotaxi service in Austin and launched unsupervised rides in Dallas and Houston in April. The company also operates a robotaxi service in Miami, expanded the service to Orlando and Tampa. Tesla has previously identified Phoenix and Las Vegas among future expansion markets. The company received approval in April to deploy its advanced driver assistance software - called Full Self-Driving Supervised - in the Netherlands. Some other European countries have also allowed the technology following the Dutch approval. A key vote to decide on Europe-wide approval for the technology is expected later this year. Tesla is also pushing for approval in China. Tesla's shares have fallen more than 15% this year. At about $1.4 trillion, it remains the world's most valuable automaker by a wide margin, reflecting investor expectations that self-driving software, energy storage, robotaxis and humanoid robots could eventually deliver higher-margin growth than vehicle sales. (Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Pooja Desai)