Despite Big Bounce In Revenues, TSLA Shares Drop After Disappointing Earnings

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 remains mixed on the heels of an impressive delivery report.

While earnings fell 18% compared to Q2 2025 to 33c a share (well below expectations of 51c) with higher AI spending and R&D weighing on profitability; the silver lining was that Revenue came in at $28.2 billion, which was 28% higher than last year (well above expectations of $26.4 billion).

The company said it hit $100 billion in trailing twelve-month revenue for the first time in history in the second quarter, and earned $1.11 billion in net income in the quarter.

The company said its first-generation production lines for Optimus Bot are being installed in anticipation of production in 2026, with the company saying production will happen "soon."

The Cybercab is listed as in production, an improvement from the company saying it expected volume production "this year" last quarter.

Tesla said the vehicle began production in the quarter.

The Tesla Semi is listed as "commissioning" and the company said it remains on track for volume production this year.

"We are focused on maximum capacity utilization at our factories," the company said.

Despite the glorious robotic (and Robotaxi and AI compute) future ahead, 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.

Tesla's automotive gross margins were 16.3% in the second quarter, up from 15% in Q2 2025, but down from 19.2% in Q1 of this year.

Active FSD subscriptions hit 1.48 million in the second quarter, up 56% year-over-year and up from the 1.28 million reported in the first quarter.

Additionally, Tesla said that they have more than doubled their onsite compute in Texas (in terms of MW of compute) during the first half of 2026. Cortex 2 supports the development of both vehicle and humanoid robot autonomy software and will ramp further over the rest of the year to ensure we have sufficient compute resources.

Tesla spent $5.8 billion in capital expenditures in the second quarter, bringing the first half’s total to about $8.28 billion. Though capex ramped over the past three months, it’s still not on track to meet the $25 billion in 2026 outlays Musk forecast in April.

Energy storage returned to being a revenue driver, with revenue increasing 13% year-over-year after slipping in the first quarter.

Tesla deployed 13.5 gigawatt hours of storage in 2Q, up more than 50% from the prior three months (as data centers are driving demand for batteries, which can help regulate power flows and speed up connections to the grid).

David Wagner, portfolio manager at Aptus Capital Advisors, said:

“Tesla’s earnings tonight highlight a core tension between short-term financial realities and an ambitious long-term AI vision. While recent delivery rebounds demonstrate steady vehicle volume, heavy margin pressure from global price cuts and massive capital expenditure - projected at over $25 billion this year for AI compute, chips, and infrastructure - are squeezing free cash flow.”

“Ultimately, Tesla is asking investors to fund an aggressive infrastructure cycle: if its pivot into autonomous fleets and physical AI succeeds, the long-term upside is massive, but any regulatory or technological delays leave the stock vulnerable if judged solely on its core automotive margins.”

Nevertheless, the earnings miss is weighing on Tesla shares after hours, testing three-month lows ahead of the Tesla earnings conference call, with Musk at the helm, set to start about 1730ET.

Investor focus likely will be on robotaxis, Optimus robots, capital spending and CEO Elon Musk.

The company said it has "never been more optimistic about the future."