Tesla beats Q2 revenue estimates but profit miss drives 14.5% stock drop

Tesla posted second-quarter revenue of about $28.2 billion, topping the $26.2 billion consensus, yet the company’s earnings fell to $0.33 per share, roughly a third below analysts’ $0.51 expectation. The discrepancy prompted a 14.5% decline in the stock on the first trading day after the report.

The earnings shortfall reflects a sharp contraction in profitability. Net margin slipped to 3.7%, less than half its three-year average of 8.7% and far below the 15.5% peak level. Automotive margin, excluding regulatory credits, fell from 19.2% to 16.3% in the quarter.

Free cash flow turned negative as capital expenditures more than doubled from the prior period. Management indicated total outlays could exceed $25 billion for the year, with additional spending planned over the next two to three years on projects such as the Optimus robot, robotaxi services, AI compute, a semiconductor fab and solar manufacturing. To fund this, Tesla has arranged debt facilities of up to $30 billion.

Despite the profit pressure, the company recorded a record delivery quarter, with its largest order backlog since 2023 and about 55% of North American deliveries including a paid full-self-driving subscription. Energy-storage deployments also rose 53% from the previous quarter.

Analysts note that the stock’s reaction highlights investors’ concern that current automotive profits are being deliberately reduced to finance long-term projects whose returns may not materialize for years. Future performance will likely be judged by whether automotive margins stabilize and free cash flow returns to positive territory.