Since Tesla (TSLA.O) released its Q2 financial results on July 22, revealing revenue growth but a profit decline, its stock price has faced persistent pressure. By July 29, the intraday stock price had plummeted to $297.38 per share, hitting a new yearly low. Since July 22, the stock has plummeted approximately 21%, with the market value shrinking by $298.976 billion, leaving the current total market value at $1,178.2 billion.

Stockstar observed that while Tesla's delivery volume and revenue increased in Q2, its profit performance faltered across the board: net profit attributable to the parent company dropped by 5% year-on-year, operating profit plummeted by 57% year-on-year, and the gross profit margin of the automotive business declined. Additionally, Tesla's regulatory credit revenue, a key profit source, contracted significantly, while the energy storage segment also struggled to translate volume growth into profit growth.

Amid these profitability challenges, Tesla is pouring substantial cash flow into the 'cash-guzzling' expansion of AI, Robotaxi, and humanoid robots. The company's capital expenditures in Q2 more than doubled compared to the same period last year, pushing free cash flow into negative territory. While the automotive business remains the primary cash generator, the success of Tesla's high-stakes strategy of 'using automotive profits to fuel new ventures' hinges on the speed of commercialization for these emerging businesses.

01. Revenue and Sales Surge, Profits Falter

After two consecutive years of declining sales, Tesla's automotive business has shown signs of recovery for two straight quarters this year. In Q1, new car sales reached 358,000 units, up 6% year-on-year; in Q2, sales soared by 25% year-on-year to 480,100 units, setting a new record for the same period.

This sales surge drove revenue growth. In Q2, Tesla reported revenue of $28.236 billion, up 26% year-on-year. Automotive sales revenue reached $20.006 billion, up 26.72% year-on-year, slightly outpacing sales growth.

However, the sales and revenue growth did not translate into profit growth. In Q2, Tesla's net profit attributable to the parent company was $1.114 billion, down 5% year-on-year; operating profit was just $398 million, a steep 57% year-on-year decline; the operating profit margin also fell from 4.1% in the same period of the previous year to 1.4%. Compared to Q1, operating profit and operating profit margin were $941 million and 4.2%, respectively.

A significant factor suppressing profits was the decline in the average vehicle selling price. In Q2, Model 3 and Model Y deliveries reached 467,800 units, accounting for 97.42% of total deliveries. In May, Tesla officially discontinued the higher-priced Model S and Model X, meaning the contribution of high-priced models to revenue gradually diminished, with the model mix shifting toward lower-priced products.

After excluding 7,580 vehicles from operating leases, Tesla's actual sales volume in Q2 was 472,500 units. Dividing automotive sales revenue by this sales volume, the average selling price per vehicle was approximately $42,300, down about $1,299 from $43,600 in Q1.

Currently, the market's focus on Tesla's vehicle business has shifted from delivery volume growth to profit quality. The dual pressures of declining average selling prices and a shift toward lower-end product structures directly impacted Tesla's overall vehicle profitability, failing to sustain the gross profit margin improvement seen in Q1. Data shows that in Q2, the gross profit margin of the automotive business fell from 21.1% in Q1 to 16.9%, also lower than the 17.2% level in the same period last year.

Stockstar noted that as the Trump administration rolled back the clean energy policies promoted by the Biden administration, Tesla's automotive regulatory credits are losing their previous profit-boosting role. In Q2, the company's regulatory credit revenue fell to $146 million from $439 million in the same period of the previous year, a decrease of approximately 66.74%.

The energy storage business also faced a similar dilemma of 'volume growth without profit growth.' In Q2, Tesla's energy storage deployment increased by 41% year-on-year to 13.5 GWh, with revenue up 13% year-on-year to $3.139 billion. The revenue growth was mainly driven by increased installations of Megapack equipment, but the decline in the average selling price per Megapack unit and the reduction in Powerwall installations partially dragged down overall revenue. The gross profit margin for this product fell from 30.3% in the same period of the previous year to 20.4%, with gross profit correspondingly shrinking to $640 million.

02. Capital Expenditures Soar, New Ventures' Success Remains Uncertain

While the automotive business remains Tesla's core revenue source, it is no longer the sole focus. Currently, Tesla is in a period of large-scale, multidimensional 'cash-guzzling' expansion, continuously increasing investments in areas such as AI, Robotaxi, and humanoid robots.

The Q2 results vividly illustrate the strategy of 'betting future profits on the present.' In Q2, Tesla's capital expenditures surged to $5.789 billion, 2.4 times that of the same period in the previous year. The operating cash flow of $4.697 billion was insufficient to cover the massive investments, causing free cash flow to turn negative year-on-year, recording -$1.092 billion. The cash flow generated by the automotive business has been consumed by the new round of industrial construction.

Tesla's management expects capital expenditures to further increase in the second half of 2026, with the total annual amount exceeding $25 billion and continuing to grow over the next two to three years. The company stated that all capital expenditures are allocated to productive assets, covering the Optimus production line, Cybercab factory, the lithium iron phosphate factory put into operation this year, semi-truck production line, self-built semiconductor factory, and a full domestic photovoltaic industrial chain production line in the United States. Currently, Tesla still has relatively sufficient financial reserves, holding $43.5 billion in cash and short-term investments, with an approved borrowing limit of up to $30 billion.

Admittedly, large-scale capital investments have also caused operating expenses to rise sequentially, with the increase mainly coming from research and development (R&D) investments: upfront investments in the mass production of new products such as semi-trucks, Optimus, and Cybercab, the cost of newly added AI computing hardware, and litigation-related expenses. In Q2, Tesla's R&D expenses and selling, general, and administrative expenses totaled $4.353 billion, equivalent to 90% of the gross profit for the quarter, with year-on-year and sequential increases of 47% and 15%, respectively. Among them, R&D expenses were $2.371 billion, with year-on-year and sequential increases of 49% and 22%, respectively. Tesla's management stated that the company is currently in a large-scale investment cycle, with operating expenses expected to continue rising in 2026 and beyond, with the core increases coming from R&D.

Stockstar noted that from a long-term valuation perspective, the humanoid robot Optimus and Robotaxi are undoubtedly the most imaginative parts of Tesla's portfolio, but these new businesses are still in the investment phase and have not yet contributed real profits.

Tesla stated that its autonomous taxi fleet has completed over 380,000 miles of driverless operation without safety drivers. Currently deployed in seven regions in the United States, the fleet's expansion pace will continue to accelerate throughout the year. Previously, when Robotaxi was launched in Austin, it was expected to cover half of the U.S. population by the end of 2025, but the actual expansion speed has been significantly slower than planned, with a considerable distance remaining before large-scale commercialization.

Regarding humanoid robots, Tesla's Model S and Model X production lines at its Fremont factory in California have been repurposed for the first-generation production line of humanoid robots, with a planned annual capacity of 1 million units. Additionally, the company is advancing the design of a second robot production line with an annual capacity of 10 million units, expected to start production around next summer. Tesla CEO Elon Musk admitted that the production ramp-up difficulty for Optimus far exceeds that of any previous Tesla product, and the production pace should be viewed rationally.