Tesla stock slips as $25 billion capex plan squeezes margins

Tesla reported Q2 revenue of $28.24 billion, up 26 percent, but operating margin fell to 1.4 percent as capital spending surged toward a $25 billion annual budget.

"The production scaling challenge is very substantial," Chief Executive Elon Musk said on the earnings call, calling Optimus "the hardest product to scale manufacturing that we've ever made at Tesla."

Adjusted EPS of $0.33 missed consensus near $0.54, a 39 percent shortfall. Free cash flow swung to negative $1.1 billion from positive $146 million a year earlier as capex jumped 142 percent to $5.79 billion.

Shares closed at $348.75 on Aug. 28, down 1.71 percent and roughly 22 percent year to date. The stock trades at a price-to-earnings ratio above 320, leaving little room for error as Tesla bets more than $25 billion on Optimus and AI.

Metric	Actual	Consensus	Beat/Miss
Revenue	$28.24B	~$26B	+8.6%
Adjusted EPS	$0.33	~$0.54	-$0.17
Operating margin	1.4%	—	vs 4.1% YoY

Record top line, compressed bottom line

Revenue of $28.24 billion topped the mid-$26 billion consensus, supported by record deliveries of more than 480,000 vehicles in the quarter. Gross margin eased to 16.8 percent from 17.2 percent a year earlier as lower average selling prices and declining regulatory-credit revenue limited the benefit of higher unit volumes.

Operating expenses climbed 47 percent to $4.35 billion, far outpacing the 26 percent revenue growth and driving the operating margin down from 4.1 percent. Non-GAAP EPS fell 18 percent year over year to $0.33, flat against the same quarter a year earlier despite substantially higher revenue.

Cash and investments declined about $1.2 billion to roughly $43.5 billion, leaving Tesla a sizable buffer to fund its investment program. Management expects full-year 2026 capex to exceed $25 billion, with a large share directed to scaling Optimus, expanding battery and vehicle capacity, and building AI training infrastructure.

Analysts split on the robotics bet

Consensus data compiled across coverage lists 42 analysts covering Tesla, with 15 assigning a Strong Buy, two a Moderate Buy, 20 a Hold, and five a Strong Sell. Average price targets cluster in the high-$390s to low-$400s, implying roughly 14 percent to 16 percent upside from the current $348.75 price, while consensus EPS for the current fiscal year sits near $0.88.

Tesla has begun producing Optimus at its Fremont, California plant, repurposing floor space once used for Model S and Model X assembly. Musk said every component on the robot is new and that Tesla has had to build a supply chain "in its entirety," with TSMC, Samsung, Panasonic, and Micron committing capital to support the program alongside Tesla's in-house "Terafab" chip facility in Austin. The company has also discontinued its Solar Roof product after the integrated tiles reached only about 3,000 U.S. homes by 2023, far below early targets.

The spending surge and margin compression have weighed on sentiment even as Tesla holds a market value near $1.4 trillion. The negative free cash flow, a 39 percent earnings miss, and an operating margin of 1.4 percent show execution risk remains high. Investors will watch the next quarterly report for signs that Optimus and AI spending can reverse the profitability trend, since the stock's premium multiple leaves little tolerance for further misses.