Is Tesla a Buy After Its Latest Earnings Report?
Complete. Here is the key summaryTesla's Q2 revenue rose 26% to $28.2 billion, but non-GAAP net income fell 17% to $1.15 billion due to a 142% surge in capital expenditures. The stock dropped as the company missed earnings estimates and signaled continued high spending on AI initiatives like Robotaxi and Optimus. Despite record deliveries, shrinking margins and intense competition have led analysts to view the stock negatively, suggesting it remains unattractive for investment.
Although we're not done with the current earnings season, we can safely say that one of the more disappointing companies reporting its latest "quarterlies" is Tesla (TSLA -1.43%). Last week, the bellwether electric vehicle (EV) maker lifted the hood on its second-quarter performance, and investors clearly found this lacking.
Tesla's stock dived post-earnings, and it's yet to recover -- in fact, it's now flirting with a one-year low. Does that mean it's now a bargain buy for investors? Let's go behind the wheel and do a brief drive-by.
Image source: The Motley Fool.
Double-digit disappointment
The sell-off wasn't for lack of top-line growth. In the quarter, Tesla's total revenue zoomed 26% higher to just over $28.2 billion. Fittingly, vehicle revenue formed the bulk of this; it rose by 23% to $20.5 billion.
The company also posted double-digit improvements in its two other revenue buckets. Energy generation and storage was up 13% to $3.1 billion, while services/other -- a grab bag comprising pre-owned vehicle sales, fees from its Supercharger charging stations, repairs, and parts sales, among other items, advanced by 50% to nearly $4.6 billion.
Doing a U-turn to the vehicles category, Tesla produced a total of 451,758 autos, 10% higher than in the same period of 2025. Its deliveries also increased, rising by 25% to 480,126. Yet in both instances -- and hardly for the first time -- those numbers were overwhelmingly comprised of only two models, the 3 sedan and the Y SUV.
Nevertheless, Tesla didn't hesitate to mention that it logged a new record for second-quarter deliveries. In the financial sphere, it earned $100 billion in revenue on a trailing twelve-month basis for the first time in its history.
As for profitability, it was in reverse. Under standards not conforming with generally accepted accounting principles (non-GAAP, or adjusted), net income fell by 17% to $1.15 billion, or $0.33 per share. One major culprit in this was capital expenditures, which ballooned by 142% to almost $5.8 billion.
That surprised many analysts, and not in a positive way. While the company edged past their collective revenue estimate of under $27.6 billion, it missed badly on the consensus adjusted net income forecast of $0.55 per share.
NASDAQ: TSLA
Key Data Points
That's one big spender
I'd imagine most of the bearish investors bailing from Tesla after the earnings announcement were reacting to that heavy capex number. That, plus management's talk of continued high expenses for the remainder of this year, to be followed by increased spending in 2027 and 2028.
Where will all that capital be channeled? Like the tech companies it's often emulated, Tesla has spent, and aims to continue spending, large sums on building out the artificial intelligence (AI) capabilities enhancing its technology.
The not-yet-impressive Robotaxi program, for one, should continue to be generously supported; ditto for the Optimus robot that CEO Elon Musk is so fond of.
So basically, Tesla remains heavily dependent on EV sales at a time when competition continues to grow, and margins are shrinking. Meanwhile, it's devoting mountains of capital to technology that might or might not give it a competitive edge.
I'd say the same for products that are already significantly behind rivals -- like the Robotaxi when matched against Alphabet's Waymo. Or, especially, the unproven Optimus.
It's unwise to underestimate the often-mercurial yet clever Musk. Yet he and Tesla feel to me like an eternally over-reaching team whose prospects are now fading. This is a company operating chiefly in an increasingly low-margin business (automotive) that hasn't yet augmented it with enough whiz-bang products and services to keep the growth motor roaring for long.
Given that, I think the stock has more room to fall, and I'd stay away from it personally.