Tesla NASDAQ:TSLA fell 4.77% premarket after reporting second-quarter adjusted earnings of $0.33 a share, far below the $0.51 analysts expected, even as revenue of $28.24 billion topped the $25.71 billion forecast. Revenue rose 26% from a year earlier, while net income fell 5% to $1.11 billion.
Automotive revenue rose 23% to $20.52 billion, energy climbed 13% to $3.14 billion and services jumped 50% to $4.58 billion. Active FSD subscriptions rose 56% to 1.48 million. Musk said Optimus production lines are being installed but cautioned it will be "the hardest product to scale manufacturing" Tesla has made.
The margin picture deteriorated. Gross margin slipped to 16.8% from 17.2% as average selling prices fell and regulatory credit revenue declined, following Tesla's move to cheaper Model 3 and Y variants after retiring the Model S and X. Operating expenses jumped 47% to $4.35 billion on AI and research spending, dragging operating margin down to 1.4% from 4.1%.
Free cash flow turned negative at $1.1 billion, as capital expenditure surged 142% to $5.79 billion. CFO Vaibhav Taneja had guided in April to capex above $25 billion this year and told investors operating costs will keep growing in 2026 and beyond.