Kuaikeji, July 23 report: Following the close of the market on July 22 (Eastern Daylight Time in the US), Tesla published its Q2 2026 earnings report. The report highlighted a total revenue of $28.24 billion, marking a significant 26% year-on-year surge that comfortably outstripped market forecasts. Nevertheless, profitability took a notable hit, with adjusted earnings per share (EPS) dropping 18% year-on-year, underscoring the substantial pressure on profits. In the wake of this announcement, Tesla's stock price plummeted by over 4% in after-hours trading.

The primary catalyst for the revenue upswing was the record-breaking vehicle deliveries in Q2, setting a new benchmark for the corresponding period. Revenue from the automotive sector soared to $20.52 billion, a 23% year-on-year hike. The energy storage and solar energy divisions also witnessed a 13% year-on-year revenue increase. The services and software segments excelled, with revenue skyrocketing by 50% year-on-year. The number of FSD subscribers swelled to 1.48 million, and software value-added services continued to burgeon, establishing themselves as a fresh growth pillar.

Key financial indicators for this quarter displayed a marked divergence: gross profit climbed to $4.76 billion, a 22.72% year-on-year increase; gross margin stood at 16.8%, a slight dip of 0.40 percentage points year-on-year; net profit attributable to shareholders was $1.111 billion, a 5.21% year-on-year decrease; operating cash flow surged to $4.69 billion, an 84.65% year-on-year jump; free cash flow turned negative at -$1.1 billion, a stark contrast to the positive figure recorded in the same period last year; basic EPS was $0.35, a 2.78% year-on-year decline; diluted EPS remained unchanged at $0.33 year-on-year.

Despite the uptick in revenue and gross profit, net profit faced headwinds due to two primary factors.

Firstly, persistent price reductions across global markets, along with the cessation of high-end Model S and Model X production, precipitated a drop in the average selling price of vehicles. Consequently, the automotive gross margin experienced a slight year-on-year decrease, squeezing profit margins per unit.

Secondly, Tesla has embarked on its most extensive investment phase to date. Capital expenditures in this quarter ballooned to $5.79 billion, a staggering 142% year-on-year increase. Substantial funds were channeled into long-term initiatives such as FSD AI training, Cybercab autonomous taxis, Optimus humanoid robot production lines, and battery factory expansions. These hefty investments have eaten into current profits and directly resulted in negative free cash flow, despite the robust growth in operating cash flow.

Profitability data segmented by business unit revealed significant disparities: core automotive profits continued to feel the pinch, while service segments such as maintenance, repairs, and FSD subscriptions achieved record profits. The high-margin nature of software businesses is becoming increasingly apparent.

Tesla's management explained that short-term profit sacrifices and substantial capital investments are geared towards securing a long-term foothold in the autonomous driving and humanoid robotics sectors. The company is foregoing current profitability to finance technological advancements and production capacity expansions, banking on future software and autonomous taxi businesses as the main profit engines.

Capital markets have responded with caution, as investors fret over the enduring price wars that are eroding automakers' profits and the extended return cycle for hefty AI investments. Analysts predict that Tesla will persist with its low-price, high-volume strategy in the near term, with gross margin recovery anticipated only after the commercialization of Robotaxi services.