Tesla reported second-quarter revenue of $28.24 billion on Wednesday, beating analyst estimates, while operating income fell 57.0% to $398 million and margins came in well below expectations.
Non-GAAP earnings of $0.33 a share missed the $0.55 that 23 firms had supplied to the company’s own consensus, a shortfall of 40.0%. Diluted GAAP earnings were $0.32 against $0.36 expected.
Operating margin narrowed to 1.4% from 4.1% a year earlier, against the 5.4% analysts had modelled.
A conference call with chief executive Elon Musk and other members of management follows the results at 5:30 p.m. Eastern time. The stock extended declines on after hours to $364.
Management told shareholders the period was “a strong quarter for our core vehicle, energy and services businesses.”
Revenue rose 26.0% year on year and exceeded the compiled estimate of $27.58 billion. Tesla said trailing twelve-month revenue passed $100 billion for the first time.
Margins
Automotive gross margin excluding regulatory credit sales fell to 16.3% from 19.2% in the first quarter, ending four consecutive quarterly increases and undershooting the roughly 18.1% the street had expected.
The measure had climbed from 15.0% in the second quarter of 2025 through 15.4%, 17.9% and 19.2%.
Total GAAP gross margin was 16.8%, down from 21.1% three months earlier and below the 19.5% consensus.
Regulatory credits, which had cushioned automotive margins for years, largely disappeared. Credit revenue fell to $146 million from $380 million in the first quarter and $439 million a year earlier, a decline of 66.7%.
Credits contributed 0.6 percentage points of automotive gross margin, against 1.9 points in the first quarter and 2.2 points a year before.
Tesla attributed the operating income decline to higher operating expenses driven by artificial intelligence and research projects, stock-based compensation including the 2025 CEO Performance Award, lower credit revenue and a lower average selling price. The company also cited energy warranty charges arising from a vendor cell issue.
Operating expenses rose 47.0% to $4.35 billion, with research and development at $2.37 billion, up 21.8% sequentially.
What lifted net income
GAAP net income attributable to common stockholders was $1.11 billion, nearly three times operating income.
The gap came from outside operations. Other income of $590 million included a $1.01 billion unrealised gain on the company’s SpaceX equity investment, worth $763 million after tax.
A further $274 million came from tax items, which Tesla described as the release of valuation allowances on certain California deferred tax assets and accruals related to pillar two.
Stripping both from the GAAP figure leaves $77 million.
The company excluded the SpaceX gain from non-GAAP net income of $1.15 billion and from adjusted EBITDA, which fell 4.0% to $3.27 billion for a margin of 11.6%.
Cash and capital spending
Free cash flow was negative $1.09 billion, a smaller outflow than the $3.25 billion analysts had forecast.
Capital expenditure reached $5.79 billion, up 142.0% year on year and $909 million below consensus, though more than double the $2.49 billion spent in the first quarter.
Operating cash flow rose 85.0% to $4.70 billion.
Battery output remains the constraint on volume. Tesla described pack capacity expansion as “the main limiting factor to near-term vehicle production volume increase.”
Cash, equivalents and short-term investments closed at $43.52 billion, down $1.22 billion sequentially but $2.53 billion above the level analysts expected.
Segments
Automotive revenue rose 23.0% to $20.52 billion on record second-quarter deliveries of 480,126 vehicles, reported earlier this month.
Energy generation and storage revenue rose 13.0% to $3.14 billion on deployments of 13.5 GWh, the second-best quarter on record and a company high on a trailing twelve-month basis. Tesla reported record deployments in Europe, the Middle East and Africa.
Services and other revenue rose 50.0% to $4.58 billion. Gross profit in the segment grew $302 million sequentially to a record $648 million at a 14.0% margin.
Days of supply fell to 15 from 27 in the first quarter.
Autonomy and robotics
Active full self-driving subscriptions reached 1.48 million, up 55.8% year on year and 15.6% in three months, the largest quarterly addition on record. The metric is defined under the 2025 CEO Performance Award, which sets a goal of 10 million.
Tesla said attach rates hit a record in North America, with more than 55.0% of new deliveries including a subscription.
Cybercab moved to production status at Gigafactory Texas with listed capacity above 125,000 units a year, having appeared as pilot production three months earlier.
Robotaxi service now covers seven metropolitan areas after launches in Miami, Orlando and Tampa. Tesla had added 58 vehicles to its Texas fleet in a single day earlier in July, as EV reported.
Phoenix and Las Vegas remain listed as preparations underway, the only two markets from a seven-city target set for the first half that have not opened.
Optimus lines at Fremont and Gigafactory Texas both remain at construction status with no capacity attached, though the company said production is anticipated later this year and that initial builds will feed an Optimus Academy for training data collection.
Shares and context
Spending, not returns, framed the company’s own account of the quarter. Shareholders were told Tesla is “in its largest and most exciting period of investment” and that “scaling will be non-linear.”
Tesla shares closed 1.3% lower at $374 before the release, down 16.8% so far in 2026 against a gain of 12.5% over twelve months.
Shareholders submitted 429 questions through the Say Technologies platform ahead of the call, as EV reported, with the most-voted entry citing three consecutive quarters of missed robotaxi targets. Comparable themes preceded the first-quarter call, as EV reported then.
European sales had been recovering this year.
BYD sold 557,090 passenger battery electric vehicles in the quarter against Tesla‘s 480,126, though the Chinese manufacturer’s figure fell 8.2% year on year, narrowing the first-half gap to 29,330 units.
