Tesla delivered a record and still disappointed where it counts. The company reported second-quarter revenue of $28.24 billion on Wednesday, up 26% from a year earlier and ahead of Wall Street’s roughly $27.6 billion estimate, crossing $100 billion in trailing-twelve-month revenue for the first time in its history. Yet the profit picture underneath told a harder story, and it was the one investors had been bracing for.

Adjusted earnings landed at $0.33 per share, well below the $0.53 to $0.55 analysts expected — a substantial miss that confirmed the fear hanging over the quarter since the delivery figures went public. Tesla moved a record 480,126 vehicles in the period, but it did so by leaning on price cuts and incentives, and the cost showed up exactly where analysts warned it would: in the margins.

Gross margin slipped to 16.8% from 17.2% a year earlier, missing the roughly 19.4% the Street wanted and undercutting the case that Tesla’s core car business can hold its profitability at high volume. The deterioration ran deeper on the operating line, where income fell 57% to $398 million and operating margin compressed to 1.4% from 4.1%. In plain terms, Tesla sold a record number of cars and kept less of the money from each one, as average selling prices fell and the once-reliable cushion of regulatory-credit sales continued to thin.

The segment breakdown showed a company increasingly leaning on its non-automotive lines. Core automotive revenue rose 23% to $20.52 billion, while the energy generation and storage business grew 13% to $3.14 billion, with 13.5 gigawatt-hours of storage deployed. Services and other revenue jumped 50% to $4.58 billion. Software offered a bright spot: more than 55% of new deliveries included a Full Self-Driving subscription at handoff, a record attach rate that points to a growing, high-margin recurring stream even as the hardware business squeezes.

Spending is the other pressure point. Capital expenditures surged 142% to $5.79 billion as Tesla poured money into AI, robotics and manufacturing capacity, and that outlay pushed free cash flow to negative $1.09 billion for the quarter despite an 85% jump in operating cash flow. The company still sits on a formidable $43.52 billion in cash and investments, giving it room to fund its ambitions, but the quarter underscored the tension at the heart of the Tesla thesis: it is spending like a company betting its future on autonomy and robotics while its present-day car business grows thinner.

Tesla entered the report already down sharply on the year, and the results did little to settle the argument between investors focused on record volume and those focused on shrinking profit. Attention now turns to the earnings call, where management’s commentary on margins, the robotaxi rollout and its Optimus timeline typically moves the stock more than any single line in the release.

JBizNews Desk | Wall Street

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