Tesla Officially Enters 'Heavy Capital Expenditure Phase'!

Tesla's Q1 performance exceeded expectations, but this impressive result fails to mask a deeper structural shift—the company has officially entered a cycle of large-scale capital expenditure expansion, with free cash flow expected to remain under pressure throughout the year. According to Wind Trading Desk, Tesla raised its 2026 capital expenditure guidance from over $20 billion to over $25 billion and clearly stated that it will continue to consume free cash flow for the remainder of this year. Morgan Stanley analyst Andrew S Percoco subsequently revised his 2026 capital expenditure forecast up to $26.1 billion and expects a net outflow of $11.6 billion in free cash flow for the full year. At the same time, the commercialization progress of Robotaxi is slower than market expectations, and HW3 hardware has been confirmed as ineligible for the unsupervised FSD upgrade, further limiting near-term upside potential for the stock price. Q1 Performance Beat Expectations, But Quality Needs Discounting Tesla's overall Q1 performance exceeded market expectations, but several one-off factors provided significant support to margins, casting doubt on their sustainability. Specifically, automotive gross margin benefited from the release of $230 million in warranty reserves and tariff exemptions. After excluding this $230 million one-off item, the automotive gross margin (excluding carbon credits) still exceeded Morgan Stanley's expectations by 340 basis points. In the energy business, despite weaker shipment volumes, gross margin significantly exceeded Morgan Stanley's expectations by 1,350 basis points and market consensus by 1,150 basis points; however, this includes $250 million in tariff refunds. After excluding this item, the energy gross margin still exceeded Morgan Stanley's expectations by 315 basis points and market consensus by 120 basis points. Free cash flow also beat expectations, partly because actual capital expenditures in Q1 ($2.493 billion) were far below Morgan Stanley's forecast of $3.593 billion and market consensus of $4 billion. However, Morgan Stanley explicitly noted that this low level of capital expenditure does not represent a trend change—the company has confirmed that capital expenditures for the full year will accelerate significantly. Capital Expenditure Significantly Raised, Full-Year Free Cash Flow Turns Negative The further upward revision of capital expenditure guidance is the most critical signal of the quarter. Tesla raised its 2026 capital expenditure guidance by $5 billion to over $25 billion and clearly stated that it will continue to consume free cash flow for the remainder of this year. Before the earnings report, Morgan Stanley had anticipated that capital expenditure guidance might be raised to the range of $25 billion to $30 billion, depending on the pace of progress in Terafab and solar businesses. After the earnings report, Morgan Stanley revised its 2026 capital expenditure forecast up to $26.1 billion, while reducing its free cash flow forecast from -$8.4 billion to -$11.6 billion. Its 2027 free cash flow forecast was also lowered from -$1.5 billion to -$4.7 billion. This round of capital expenditure expansion covers manufacturing capacity, energy, automotive, and semiconductor sectors, while heavily investing in computing power and next-generation physical AI infrastructure (including Robotaxi and humanoid robots). The company also confirmed plans to build a research wafer fab (Terafab) within the Texas Superfactory campus, costing $3 billion, with a monthly capacity of thousands of wafers covering logic, memory, and packaging, and adopting Intel's 14A process technology. Robotaxi: Steady Progress, But Commercialization Slower Than Expected Robotaxi is at the core of Tesla's physical AI narrative, but its implementation pace is testing market patience. Tesla confirmed that the Robotaxi rollout plan is still underway. Musk expects coverage of "about a dozen" states by the end of the year, but the company emphasized maintaining a cautious stance, stating that "expansion constraints lie in strict validation processes." Notably, compared to the "first half of 2026" timeline noted in last quarter's earnings call, the status of five additional cities has been updated to "preparations underway," reflecting a more conservative tone. Morgan Stanley pointed out that since December last year, Robotaxi mileage has grown by over 2.5 times, but the official launch of unsupervised Robotaxi remains slower than investor expectations. Analysts believe that rather than tracking specific city launch dates, monitoring the National Highway Traffic Safety Administration's (NHTSA) monthly data and comparing existing fleet safety metrics with the early rollout progress of Waymo offers a more valuable observational dimension. HW3 Confirmed Out, Existing Fleet Value Questioned During the earnings conference call, Musk cautiously stated that unsupervised FSD may begin rolling out to passenger vehicles in Q4 2026, potentially limited to specific geofenced operating areas initially. However, the company explicitly confirmed that HW3 hardware will not receive this upgrade, a statement more decisive than previous wording. This news triggered widespread investor concern regarding the value of Tesla's installed fleet. Morgan Stanley estimates there are currently about 3.5 million HW3 vehicles on the road, accounting for approximately 40% of Tesla's total installed base of about 8.5 million vehicles. This means a significant proportion of existing owners will be excluded from the future of autonomous driving, potentially dragging down the "Network Services" segment, which carries the highest weight in Tesla's valuation framework. Energy Storage Business: Long-Term Logic Intact, Short-Term Pace Uncertain Tesla's Energy Storage System (ESS) business maintains strong long-term demand prospects, though Morgan Stanley's confidence in growth pace for the remainder of this year has diminished. The company provided only vague guidance stating "2026 shipments will exceed 2025 levels," without specific quantitative targets. Morgan Stanley lowered its 2026 Tesla ESS deployment forecast from 59.1 GWh (27% YoY growth) to 55.3 GWh (18% YoY growth), primarily due to the inherent timing uncertainty of large-scale storage projects. Changes in customer project schedules could lead to significant fluctuations in quarterly shipments. Valuation: Long-Term Logic Complete, Near-Term Upside Limited Morgan Stanley maintains an Equal-weight rating on Tesla with a $415 price target, noting that near-term upside potential is constrained. Using a Sum-of-the-Parts (SOTP) valuation method, the $415 target price consists of five components: Core Automotive Business at $45/share (based on 8.5 million deliveries in 2040 and 9.7% EBIT margin); Network Services at $145/share (80% penetration rate in 2040, average monthly ARPU of $240); Tesla Mobility at $125/share; Energy Business at $40/share; and Humanoid Robotics at $60/share (including a 50% probability discount). In a bull case scenario, the target price is $826, corresponding to approximately 78x 2030 expected EV/EBITDA. In a bear case scenario, the target price is $131, corresponding to approximately 27x 2030 expected EV/EBITDA. Morgan Stanley notes that while the long-term physical AI narrative logic remains complete, the dual pressures of sharply rising capital expenditures and slower-than-expected commercialization of key AI projects will continue to suppress stock performance in the near term. This valuable content comes from Wind Trading Desk. For more detailed analysis, including real-time commentary and frontline research, please join【 **Wind Trading Desk · Annual Membership**】 ![](https://wpimg-wscn.awtmt.com/3c4a713c-7a38-4582-9850-d0eabaf0e7ad.png) Risk Disclosure and Disclaimer Markets involve risk; investment requires caution. 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