Tesla reported record second-quarter revenue of $28.24 billion for 2026, driven by its highest-ever second-quarter vehicle deliveries, although increased operating expenses and capital investment reduced profitability and pushed free cash flow into negative territory.
The quarterly revenue represented a 26% year-on-year increase, taking Tesla’s trailing 12-month revenue above $100 billion for the first time. The results exceeded analysts’ revenue expectations but earnings fell short of market forecasts.
Record Deliveries Drive Revenue Growth
Automotive revenue rose 23% year-on-year to $20.5 billion, supported by global deliveries of 480,126 vehicles, a record for the second quarter and a 25% increase from the same period a year earlier.
Vehicle production increased 10% to 451,758 units.
The Model 3 and Model Y remained Tesla’s highest-volume products, accounting for 467,762 deliveries during the quarter.
Revenue from the Energy Generation and Storage business increased 13% to $3.14 billion, while the Services and Other segment grew 50% to $4.58 billion, with Tesla reporting record profitability and gross margin for that business.
The company said several international markets, including South Korea, Australia, Colombia, Japan, Taiwan, Thailand, Portugal, the Philippines, Chile, Slovenia and Lithuania, achieved record quarterly deliveries. Tesla also launched the Model YL in the United States during July.
“Q2 was a strong quarter for our core vehicle, energy and services businesses as well as our manufacturing, infrastructure and AI initiatives,” Tesla said in its shareholder letter. “Our focus remains on strengthening these core businesses and making the necessary investments that will deliver Amazing Abundance.”
Higher Costs Reduce Profitability
Despite higher sales, Tesla’s profitability declined as spending on manufacturing capacity, artificial intelligence infrastructure and product development continued to increase.
Operating income fell 57% year-on-year to $398 million, while operating margin narrowed from 4.1% to 1.4%.
GAAP net income declined 5% to $1.11 billion, equal to diluted earnings per share of $0.32. On a non-GAAP basis, net income totaled $1.15 billion, or $0.33 per share.
According to market consensus cited by CNBC, analysts had expected adjusted earnings per share of about $0.51 on revenue of approximately $25.7 billion.
Tesla attributed the weaker operating performance to higher operating expenses, lower regulatory credit revenue and lower average selling prices.
Operating expenses increased 47% year-on-year to $4.35 billion, while capital expenditure surged 142% to $5.79 billion.
Although operating cash flow rose 85% to $4.70 billion, free cash flow fell to negative $1.09 billion, compared with positive $1.44 billion in the previous quarter.
“We will manage the business such that we ensure a strong balance sheet, maintaining sufficient liquidity to fund our product roadmap, long-term capacity expansion plans – including further vertical integration – and other expenses,” the company said.
Manufacturing and Battery Expansion Continue
Tesla said expanding manufacturing capacity remains a strategic priority across its vehicle, battery and energy storage businesses.
The company confirmed that Cybercab has entered production at Gigafactory Texas, with engineering validation vehicles already undergoing public-road testing. Employee rides in production Cybercabs also began during July.
Production of the Tesla Semi remains scheduled to begin in Nevada during 2026, while construction continues at Megafactory Texas, where Tesla plans to manufacture Megapack 3 and Megablock energy storage systems later this year.
Battery production continues to constrain vehicle output, according to Tesla. The company said increasing battery pack capacity remains the primary limiting factor for expanding global production.
Work also continued on battery manufacturing in Berlin, lithium refining and cathode production in Texas, lithium iron phosphate (LFP) cell production in Nevada and expanded manufacturing of 4680 battery cells for the Cybercab, Tesla Semi and Model Y.
Tesla also reported progress on its semiconductor fabrication facility in Austin, which is intended to support long-term production of logic and memory chips for vehicles and robotics.
Robotics and Autonomous Driving
Tesla continued investing in its robotics programme during the quarter.
The company permanently decommissioned the Model S and Model X production lines at its Fremont factory to make room for first-generation production lines for the Optimus humanoid robot.
“We have decommissioned the manufacturing lines for Models S & X at our Fremont Factory and are installing the first-generation lines for Optimus, where we expect to start production soon,” Tesla said.
The initial Optimus robots will be used internally for employee training and software development through Tesla’s Optimus Academy.
Separately, Tesla is expanding data collection for Optimus development. According to Handelsblatt, selected employees at the company’s Grünheide factory in Germany will wear backpack-mounted cameras to record assembly movements for training the humanoid robot.
FSD and Robotaxi Expansion
Tesla also continued expanding its autonomous driving business.
The company said 1.48 million customers now subscribe to Full Self-Driving (FSD), representing 56% year-on-year growth. More than 55% of new vehicle deliveries in North America included an FSD subscription during the quarter.
Tesla also reported receiving regulatory approvals for FSD deployment in Lithuania, Estonia, Denmark and Belgium, following earlier approval in the Netherlands.
Robotaxi operations expanded during July to Miami, Orlando and Tampa, joining existing services in Austin and the San Francisco Bay Area. Tesla said launches are also planned in Phoenix and Las Vegas.
Looking ahead, the company said it will continue investing heavily in artificial intelligence, battery manufacturing, semiconductor production, robotics and manufacturing capacity.
“Tesla is in its largest and most exciting period of investment,” the company said. “Scaling will be non-linear, and we are focused on long-term value creation. We’ve never been more optimistic about the future.”
