It’s hard to get a handle on Tesla’s current position in the market after two asymmetrical quarters.
Tesla reported second-quarter revenue of $28.2 billion, a record that topped analyst estimates of $27.6 billion. However, the 33 cents per share the company reported missed estimates from analysts polled by Tesla, who were expecting 55 cents per share.
So it seems that as Tesla chased volume, delivering 480,126 vehicles, a 25% increase from the same period a year ago, it sacrificed margins to get there. Net income for the quarter fell 17% to $1.15 billion. Analysts were expecting net income of $1.27 billion.
Meanwhile, Tesla’s results from the first quarter were flipped.
Tesla missed analyst revenue expectations, reporting $22.39 billion versus analysts’ $22.64 billion, but earnings of 41 cents per share topped estimates of 37 cents per share.
Revenue was 16% higher year over year, including a 16% increase in auto revenue to $16.2 billion from $14 billion last year.
Tesla delivered more than 358,000 vehicles in the quarter, a 6% increase over last year. But Tesla has reported falling deliveries for two consecutive years.
With such a topsy-turvy trajectory, it can be hard to grasp just exactly how well the electric vehicle maker is doing. So TheStreet obtained comments from three institutional investors who gave their early reactions to the Wednesday, June 22, release.
Tesla shareholders point out the negatives in Tesla Q2 earnings
Tesla CEO Elon Musk did a good job of preparing shareholders for the margin squeeze in the first quarter, finally taking the time to “inject some realism” (his words) into the Tesla story.
Musk shared that Tesla was raising its 2026 capital expenditure expectations above $25 billion, with CFO Vaibhav Raneja warning of “negative free cash flow impacts for the rest of the year.”
It’s an issue David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, has been preparing for.
“Tesla’s earnings tonight highlight a core tension between short-term financial realities and an ambitious long-term AI vision,” Wagner said in comments emailed to TheStreet.
“While recent delivery rebounds demonstrate steady vehicle volume, heavy margin pressure from global price cuts and massive capital expenditure — projected at over $25 billion this year for AI compute, chips, and infrastructure — are squeezing free cash flow.”
Still, Bill Birmingham, managing director at REX Shares, seemed a bit surprised by just how disappointing the company’s profitability was in the quarter.
“Non-GAAP EPS of $.33 badly missed,” Birmingham told TheStreet. “More importantly, non-GAAP gross margin fell to 16.8% (ex-credits), substantially lower than the 18% floor that we set out in the preview.
“Tesla specifically attributed the pressure to lower vehicle ASP and mix, reduced regulatory-credit revenue, sharply higher AI/R&D, stock-based compensation and SG&A, as well as energy warranty charges. In other words, the record delivery quarter generated a top-line beat but not operating leverage.”
South China Morning Post / Getty Images
Tesla shareholders see some positives from Q2 results
Brian Mulberry, chief market strategist at Zacks Investment Management, noted that the 47% increase in operational expenses in Tesla’s second quarter was tied to the investments the company is making in Optimus and robotics, sounding more forgiving of the company’s falling margins.
Instead, he was more focused on the company’s growth areas.
“Power generation and storage showed steady growth, showing +40% higher revenues and continued acceleration in demand,” Mulberry told TheStreet. “In Q2 2026, Tesla achieved a 25% year-over-year increase in deliveries to 480,126 vehicles, driven by inventory reduction and heavy promotions that, along with a 67% drop in regulatory credits, compressed automotive gross margins (ex-credits) to 16.3%.”
Strong demand is the biggest bullish takeaway from the quarter, as inventory improved, falling to 15 days of supply from 27.
“Tesla cited record deliveries across a broad range of smaller markets, which argues against the entire volume increase being inventory dumping,” Birmingham said. Still, he admitted the quarter left unanswered questions about durability.
“The release does not address the Chinese export/domestic demand split, European sustainability, nor does it provide a backlog update. All of these remain open for the call,” Birmingham said.
Tesla investors have to decide whether the positives outweigh the negatives, and David Wagner had a succinct breakdown of the company’s current investment picture.
“Ultimately, Tesla is asking investors to fund an aggressive infrastructure cycle: if its pivot into autonomous fleets and physical AI succeeds, the long-term upside is massive, but any regulatory or technological delays leave the stock vulnerable if judged solely on its core automotive margins,” Wagner explained to TheStreet.
Tesla shares were trading 12.5% lower shortly after the opening bell on Thursday, July 23.
