TSLA 2Q26 First Take: Overall, TSLA released an underwhelming report that failed to meet expectations, which had been heightened by a significant beat in Q2 delivery numbers. Key details follow:
Total Q2 revenue reached $28.2BN (+25.5% YoY), largely in line with the estimated $28.1BN. However, GPM came in at 16.8%, plunging 430bps QoQ and missing the 19.5% estimate. Business segment breakdowns include:
a. Decent Auto revenue but persistent margin pressure: Auto sales revenue hit $200BN (+27% YoY), driven by a 25% YoY growth in deliveries. Conversely, ASP continued to slide, dropping $1,300 QoQ to $42,000. This decline was likely due to a product mix shift toward lower-priced models (following Model S/X discontinuation), ongoing promotions offsetting minor price hikes, and regional headwinds as US share fell while Europe and other regions grew.
Core Auto GPM (excl. regulatory credits and leasing) stood at only 16.3%. Despite the delivery beat, this margin contracted 290bps QoQ, significantly trailing the 18.4% estimate.
Results were further impacted by the absence of last quarter’s $250mn one-time warranty and tariff benefits, which had boosted the previous margin by approx. 200bps.
Consequently, the QoQ decline in core Auto GPM was primarily driven by the expiration of these one-time gains, coupled with lower revenue per vehicle and rising raw material costs (commodities and storage materials).
b. Energy storage underperforms with sharp margin contraction: Although storage deployments reached 13.5 GWh (+53% QoQ), the second-highest quarterly level ever, total energy revenue was only $3.1BN, missing the $3.77BN estimate. This was mainly due to a sharp drop in storage ASP, causing the segment GPM to crash from 39.5% to 20.4%.
The margin collapse was triggered by a $240mn one-time adjustment for battery cell issues in existing projects and the absence of over $200mn in Q1 tariff benefits. Additionally, commercial storage ASPs continue to fall amid intensifying competition. Management now expects long-term storage GPM to stabilize in the low-to-mid 20% range, a significant downgrade from the previous 30%+ steady-state target, reflecting escalating competition even in the US market.
Ultimately, due to the massive margin miss and high OpEx (surging R&D from AI investments and rising SG&A from management incentives), Q2 OP was only $400mn, far below the $1.7BN estimate. OPM subsequently fell 280bps QoQ to 1.4%.
However, as TSLA’s stock price becomes increasingly decoupled from auto fundamentals (with the auto biz. accounting for less than 1/3 of market cap), AI remains the primary valuation driver. As AI moves from the 'concept' to 'validation' phase, quarterly reports serve as critical windows for investors to gauge progress and probability of success:
a. Optimus: Markets were eyeing the debut of Optimus V3 and confirmation of mass production timelines (expected July/Aug). According to MS reports, TSLA had begun issuing capacity guidance to suppliers for 1,000 units/week by Sept. and 2,500 units/week by year-end.
However, the earnings call lacked these specifics. Instead, management offered a grander vision, aiming for Optimus 4 capacity to be an order of magnitude higher than Optimus 3 (~1mn units/year), targeting approx. 10mn units/year.
b. Robotaxi: Actual progress remains slow, with TSLA currently operating a small fleet of 30-50 vehicles in Austin. Only about 50-60% of trips are unsupervised, a pace that has left investors dissatisfied. The market is eager for a large-scale rollout, especially as competitor Waymo already operates ~3,800 vehicles across over 30 cities.
TSLA’s current strategy is to expand from 'city-by-city' to 'statewide' coverage. They aim to resolve software and operational issues within small, controlled fleets before a massive deployment. However, a specific timeline for that large-scale rollout remains undisclosed.
Given the earnings miss and the lack of confirmation on key AI milestones during the call, TSLA’s stock price is expected to remain under pressure unless major AI breakthroughs occur. $Tesla(TSLA.US) $TSLA 2X Long ETF(TSLL.US)
