Tesla Inc. experienced a significant stock decline after reporting second-quarter adjusted earnings of $0.33 per share, considerably below the $0.51 analyst estimates compiled by Bloomberg. This missed forecast, combined with a negative free cash flow of $1.09 billion—the first in over two years—triggered a sell-off. The company attributed much of this to substantial investments in AI, robotics, and autonomy, with capital expenditures more than doubling to $5.8 billion in the quarter, pushing operating costs up by 47% to $4.35 billion.
Despite a 26% increase in revenue to $28.2 billion, surpassing expectations, and record vehicle deliveries, the market reacted negatively to the profit miss and increased cash burn. Gross margins contracted by over 2 percentage points to 16.9% due to declining regulatory credit revenue and lower average selling prices for its cars. CFO Vaibhav Taneja reiterated plans to spend over $25 billion on capital expenditure this year, a nearly threefold increase from 2025, with further increases expected for Robotaxi expansion, Optimus robot production, and a chip manufacturing facility.
Shares plummeted by 13% to $235, reaching their lowest level in nearly a year and making Tesla the worst performer among the Magnificent Seven stocks in 2026, with a 28% year-to-date loss. This downturn allowed short sellers to pocket an estimated $4 billion in profits. Analysts from Morgan Stanley, while acknowledging the necessity of the investments for leadership in autonomy and robotics, lowered their price target for Tesla to $400 from $417 due to increasing capital expenditure and projected worsening cash burn through the end of the decade. The slow rollout of robotaxis, compared to previous projections, also contributed to investor concerns regarding monetization and scaling of AI and robotics initiatives.
