Tesla’s revenue in the second quarter exceeded US$28.2 billion, a new high, but its operating profit dropped by nearly 60%. Where did the money go?
Sell more and earn less! Tesla’s revenue in the second quarter exceeded US$28.2 billion, a new high, but its operating profit dropped by nearly 60%. Where did the money go? Reporter of Every Journal | Sun Lei Editor of Every Journal | Pei Jianru On July 23, Beijing time, Tesla released its financial report data for the second quarter of this year. Revenue hit a record high for the same period in history and exceeded market expectations. However, profitability fell. Adjusted earnings per share were far lower than Wall Street expectations, and free cash flow turned negative for the first time in more than two years. Specifically, in the second quarter of this year, Tesla's total revenue reached US$28.236 billion, a year-on-year increase of 26%; its automotive business revenue reached US$20.516 billion, a year-on-year increase of 23%. Among them, car sales revenue was US$20.006 billion, car rental revenue was US$364 million, and vehicle regulatory points revenue was US$146 million. However, Tesla’s adjusted earnings per share were $0.33, well below market expectations of $0.51. Tesla explained that revenue growth in the second quarter was mainly driven by increased vehicle deliveries, FSD subscription growth, service and other business expansion, energy business growth, and the positive impact of approximately US$500 million in exchange rates. Data show that in the second quarter of this year, Tesla produced a total of 451,800 vehicles, a year-on-year increase of 10%; it delivered 480,100 vehicles, a year-on-year increase of 25%, setting a new high for the same period in the company's history. Image source: Tesla official Weibo From the perspective of sales structure, Model 3 and Model Y are still the sales pillars of Tesla. In the second quarter, the two models produced a total of 442,900 vehicles and delivered 467,800 vehicles, a year-on-year increase of 12% and 25% respectively, and contributed approximately 97.4% of the delivery volume. Other models, including Cybertruck, produced 8,822 units, a year-on-year decrease of 34%; 12,400 units were delivered, a year-on-year increase of 19%. According to Tesla, in the second quarter of this year, its deliveries hit record highs in multiple markets, including South Korea, Australia, Colombia, Japan, Thailand, Portugal, Philippines, Chile, Slovenia and Lithuania. In July, Tesla launched Model Y L in the United States and received good feedback. However, it is worth noting that the growth in sales and revenue has not brought about a simultaneous improvement in profits. In the second quarter of this year, Tesla's operating profit was only US$398 million (approximately RMB 2.7 billion), a 57% year-on-year drop; operating profit margin dropped to 1.4% from 4.1% in the same period last year; automotive business gross profit margin also dropped to 16.9% from 21.1% in the first quarter of this year. Industry analysts believe that Tesla's profit decline is mainly affected by the decline in the average selling price of cars. In order to stimulate demand, Tesla has launched a number of car purchase discounts and also discontinued the higher-priced Model S and Model X models. Tigress Financial Partners analyst Ivan Feinseth said: "Tesla has achieved its best second-quarter sales in history, but the market is more focused on profit performance. Its sales growth is mainly driven by heavy discounts, so profit margins have been significantly squeezed." In addition, Tesla’s ongoing “AI gamble” has also dragged down profit performance. In the second quarter of this year, Tesla's R&D investment and capital expenditure increased significantly, with capital expenditure reaching US$5.789 billion, a year-on-year surge of 142%. The large-scale investment directly caused free cash flow to turn from positive to negative for the first time in two years, with an outflow of approximately US$1.09 billion. Tesla Chief Financial Officer Vaibhav Taneja said the company’s capital expenditures in 2026 are expected to exceed US$25 billion and will continue to grow in the next two to three years. Tesla CEO Musk said Tesla should advance investment "as quickly as possible" without wasting money to support autonomous driving, AI and and other long-term development directions. While short-term profits are under pressure, FSD subscriptions and Robotaxi are gradually becoming new sources of growth outside of Tesla's automotive business. As of the end of the second quarter of this year, the number of paying Tesla FSD users has reached 1.48 million, an increase of 56% from 950,000 in the same period last year, and an increase of 200,000 from the end of the first quarter of this year. Musk believes that as FSD successively obtains regulatory approvals from various countries, market demand will further increase.
In addition, Tesla has begun to push FSD V14 lite to vehicles equipped with AI3 (HW3) hardware, distilling the driving behavior of the V14 series on AI4 vehicles to the previous generation hardware platform. In terms of Robotaxi, Tesla’s service scope has expanded to many cities in the United States. At the same time, Cybercab has also started production at the Texas Gigafactory and entered the public road engineering testing stage. Tesla expects that as manufacturing costs continue to decline and AI, software and Robotaxi fleet businesses gradually increase in volume, future profit sources will further shift from hardware sales to AI, software and fleet operation businesses. Tesla’s U.S. stock price fell after the earnings report was released. As of the close of trading on July 22, Eastern Time, Tesla's stock price fell by US$4.92 to US$374.01 per share, a decrease of 1.30%. In after-hours trading, Tesla shares fell further, down 3%.
In addition, Tesla has begun to push FSD V14 lite to vehicles equipped with AI3 (HW3) hardware, distilling the driving behavior of the V14 series on AI4 vehicles to the previous generation hardware platform. In terms of Robotaxi, Tesla’s service scope has expanded to many cities in the United States. At the same time, Cybercab has also started production at the Texas Gigafactory and entered the public road engineering testing stage. Tesla expects that as manufacturing costs continue to decline and AI, software and Robotaxi fleet businesses gradually increase in volume, future profit sources will further shift from hardware sales to AI, software and fleet operation businesses. Tesla’s U.S. stock price fell after the earnings report was released. As of the close of trading on July 22, Eastern Time, Tesla's stock price fell by US$4.92 to US$374.01 per share, a decrease of 1.30%. In after-hours trading, Tesla shares fell further, down 3%.