Tesla profit misses estimates as robotaxi rollout lags and AI spending burns cash

Record deliveries, but profit falls

Tesla delivered a record 480,126 vehicles in the second quarter of 2026, a 25% increase from a year earlier, and production of 451,758 units meant deliveries outpaced output by more than 28,000. Revenue rose 26% to $28.2 billion. However, adjusted net income dropped 17% to $1.2 billion, missing analyst expectations of $1.9 billion. The company's operating margin shrank to 1.4% from 4.1% a year ago, as discounts and lower average selling prices ate into profitability. Automotive revenue per vehicle fell to $42,730 from $45,345, and automotive margins excluding regulatory credits came in at 16.3%, below the 18.7% analysts had forecast.

Robotaxi rollout hits regulatory and operational snags

A year after Elon Musk predicted Tesla's robotaxi service would cover half the U.S. by the end of 2025, the rollout has been limited to a handful of cities in Texas and Florida, often confined to outlying neighborhoods rather than busy downtowns. Paying customers have traveled 2.5 million miles in the service, including 380,000 miles without an in-vehicle safety monitor, but that remains a fraction of Waymo's 220 million autonomous miles through March. Vice President of Vehicle Engineering Lars Moravy said regulations vary city by city, forcing a methodical approach that contrasts with Musk's earlier claim of a "general solution that works anywhere." CFO Vaibhav Taneja acknowledged that the company is still working through operational and software issues before scaling up.

Regulatory situations are different city by city. The reason we're expanding city by city is to make sure that we're meeting all of those one at a time.

There are different kinks... not just on the software front, but on the operations front, that we're trying to tackle.

Heavy AI and robotics spending burns cash

Tesla's capital expenditures more than doubled to $5.8 billion, contributing to negative free cash flow of $1.1 billion, the first cash burn in over two years. Musk said the company plans to invest over $25 billion in 2026, nearly triple the $8.5 billion spent last year, to fund AI, robotaxis, and humanoid robots. The energy storage business provided a bright spot, deploying 13.5 GWh, up from 9.6 GWh a year earlier. Services revenue doubled to $4.6 billion, helped by 1.5 million active Full Self-Driving subscriptions, up 56% year-over-year. Tesla also gained approval to deploy FSD in the Netherlands in April, and some other European countries have followed, while the company pushes for approval in China.

This is a massive capex year, but I'm confident that all the things that we are investing in will yield incredible returns.

European sales surge, but US market struggles

Tesla sold about 170,000 cars in Europe in the first half of 2026, a 55% jump according to ACEA data, as high fuel prices linked to the Iran war boosted EV demand. In the US, the removal of a $7,500 tax credit and other policy changes have hurt sales, and regulatory credit revenue fell to $146 million from $439 million a year ago. The company has relied on lower-priced trims and a new six-seater Model Y variant launched this month to stimulate demand. Wall Street expects Tesla to deliver about 1.7 million vehicles in 2026, but analysts remain divided on whether the second-quarter rebound is sustainable.

Investor patience tested

Tesla's stock, down 17% this year, trades at 166 times forward earnings, reflecting bets on future robotaxi and AI revenue. Shares fell 4% in after-hours trading following the earnings release. Analysts expressed frustration with the slow robotaxi expansion. Forrester's Paul Miller noted Waymo's commanding lead, while Barclays analysts said Tesla's perceived scaling advantage has not materialized. RBC's Tom Narayan said lower prices drove much of the delivery beat, and Ryan Lee called monetisation the central concern after the earnings miss.

Tesla's unsupervised robotaxi miles remain well below the more than 220 million autonomous miles driven by Waymo through the end of March, underscoring the lead Alphabet's self-driving unit holds in commercial deployment.