Key Takeaways:
Tesla reported Q2 revenue of $28.2 billion, up 26% year-over-year, but non-GAAP EPS of $0.33 missed consensus by 35%.
"The investment phase we're in is the fastest industrial-scale expansion since World War II," CFO Vaibhav Taneja said, citing simultaneous spending on Robotaxi, Optimus, semiconductor factories, and solar manufacturing.
Operating profit fell 57% year-over-year to $398 million, with the operating margin dropping to 1.4% from 4.1%. Automotive gross margin excluding regulatory credits slipped to 16.3% from 19.2% in Q1. Capital expenditures surged 142% to $5.79 billion, driving free cash flow to a $1.09 billion deficit after a $1.44 billion surplus in Q1. Regulatory credit revenue fell to $146 million from $439 million a year earlier. Operating expenses rose 47% to $4.35 billion, driven by AI infrastructure and research and development.
Shares fell more than 14% the day after the July 22 earnings release and closed the week down roughly 20%, the largest weekly decline since 2022. The stock trades at about 177 times forward earnings, among the highest in the Magnificent Seven. Bohdan Kucheriavyi, an analyst at Seeking Alpha, said his updated DCF model yields a fair value of $91.95 per share, about 70% below current levels. The Nasdaq Composite fell 2.15% on July 23 as oil prices rose on Middle East tensions and Alphabet's earnings raised AI investment concerns, though Tesla's decline outpaced the broader market.
Robotaxi service now operates in seven cities across three states, with miles driven growing 10% weekly. Shareholders representing 9.3 million shares voted in support of a question challenging management's repeated target misses. Optimus production remains at zero units, though Tesla has begun converting Model S and Model X lines at Fremont for humanoid robot manufacturing. "Optimus will be the most difficult product Tesla has ever worked on to mass-produce," Musk said. Cybercab production started at Giga Texas in February, with full-scale mass production expected later this year.
Energy storage deployments reached 13.5 GWh, up more than 40% year-over-year, while services revenue grew 50% to $4.58 billion. FSD subscriptions rose to 1.48 million from 1.28 million in Q1. Cash and short-term investments stand at $43.5 billion, with plans to secure up to $30 billion in new debt capacity. Taneja said full-year capital expenditures will exceed $25 billion, up from the initially planned $20 billion.
The results show Tesla prioritizing long-term bets on autonomous driving and robotics over near-term profitability, even as competition from BYD and other Chinese EV makers intensifies. Investors will watch the Q3 earnings call on Oct. 28 for evidence that Robotaxi scale, Optimus production, and margin recovery are materializing.
This article is for informational purposes only and does not constitute investment advice.
