Tesla shares fell more than 5% in pre-market trading on Thursday after the electric vehicle maker reported second-quarter earnings that missed analysts’ profit expectations, despite posting stronger-than-expected revenue and a sharp rebound in vehicle deliveries.
The company reported adjusted earnings of 33 cents per share for the second quarter of 2026, below analysts’ expectations of 49 cents per share. However, revenue rose to $28.24 billion, comfortably beating the consensus estimate of $25.55 billion.
Tesla’s automotive business, which has faced slowing demand in recent quarters, showed signs of recovery. Automotive revenue climbed 23% year-on-year to $20.52 billion following record quarterly deliveries of 480,126 vehicles, significantly above market expectations of around 406,000 vehicles.
The company said the strong performance was driven by record deliveries in several markets, including South Korea, Australia and Japan.
Despite the improvement in sales, automotive gross margin excluding regulatory credit sales increased to 16.3%, up 130 basis points from a year earlier but below Wall Street’s expectation of 19.4%.
The quarter also marked Tesla’s first negative free cash flow since the first quarter of 2024. The company recorded negative free cash flow of $1.1 billion as it accelerated investment across its businesses, particularly in artificial intelligence, autonomous driving, robotics and manufacturing.
Tesla has projected capital expenditure of more than $25 billion for 2026 as it expands investment in battery technology, AI software and training, chip design, manufacturing capacity and next-generation vehicle platforms.
While Tesla is not regarded as one of the largest AI infrastructure companies alongside Microsoft, Alphabet and Nvidia, its spending plans reflect the broader trend among major technology firms investing heavily in AI development.
Investors continue to focus less on Tesla’s traditional vehicle business and more on its long-term ambitions in autonomous driving and robotics, which underpin much of the company’s valuation. Before the earnings release, Tesla was trading at about 177 times forward earnings, the highest valuation multiple among the Magnificent Seven technology companies, despite its shares having fallen nearly 17% since the start of the year.
Ryan Lee, Senior Vice President of Product and Strategy at Direxion, said investors are increasingly assessing Tesla based on progress in self-driving technology and robotics rather than vehicle sales.
He noted that continued improvements in Full Self-Driving technology and further expansion of the Robotaxi service into cities such as Las Vegas and Phoenix could become important catalysts during the remainder of the year.
Morgan Stanley analysts also described Tesla’s rising capital expenditure as a necessary investment to maintain leadership in autonomous driving and robotics, although investors remain concerned about how quickly those investments will generate financial returns.
Tesla said battery production capacity remains the main constraint on increasing global vehicle output and that it is implementing measures to expand capacity.
The company also provided updates on its robotics programme, revealing that manufacturing lines for the Model S and Model X at its Fremont factory have been decommissioned to make way for first-generation Optimus robot production lines. Production is expected to begin shortly.
In its autonomous vehicle business, Tesla said it conducted engineering test drives of its Cybercab on public roads during the quarter and has started offering employee rides in the vehicle at its Gigafactory Texas campus this month.
Although Tesla’s vehicle business has regained momentum, investors are expected to remain focused on whether the company’s substantial investments in artificial intelligence, Robotaxi services and humanoid robots can deliver the long-term growth needed to justify its premium valuation.
