Tesla reported a decline in profit for the second quarter of 2026, marking the third consecutive quarterly decrease. The company's profit fell to $1.2 billion from April to June, down from $1.4 billion in the same period last year. Revenue for the quarter was $28.24 billion, exceeding analysts' average estimate of $25.71 billion, despite a decrease from $25.5 billion in Q2 2025. This profit slump is primarily attributed to aggressive price cuts implemented to stimulate demand, leading to a negative free cash flow of $1.1 billion.
Analysts had expected revenue closer to $27.6 billion, adjusted earnings of about $0.55 per share, and a gross margin around 19.5%. However, Tesla's reported adjusted earnings were $0.33 per share, significantly below expectations. The core automotive business's margins were squeezed due to these pricing strategies, including the introduction of a new Model Y Standard variant in Europe with price reductions of approximately 20%, bringing its starting price in Germany down to €39,990 from €49,990. While these cuts boosted European registrations by over 100% year-over-year in June 2026, the overall impact was a reduction in average selling prices across its fleet.
Despite the profit decline, Tesla delivered a record 480,126 vehicles in Q2, surpassing Wall Street expectations and representing a 25% increase from Q2 2025. Deliveries outpaced production by over 28,000 vehicles, reversing earlier inventory builds. The company also saw growth in its energy storage division, deploying 13.5 GWh of energy storage products, up from 8.8 GWh in Q1. However, the negative free cash flow—the first in over two years—highlights significant spending on AI infrastructure, battery capacity, robotaxis, and next-generation manufacturing. This increased spending on future technologies, alongside the struggle to offer more affordable new models while competitors like BYD introduce new, lower-priced vehicles, has led some investors to express concern about CEO Elon Musk's focus on AI and robotaxis over the core EV business. Shares were down about 3% in extended trading following the report.
