EARNINGS REVIEW
Tesla, 2026 Q2 Earnings Results
Revenue increased, but higher expenses and a low operating margin prevented corresponding earnings improvement. Investment asset valuation gains supported net income, while capital expenditure exceeded OCF, turning FCF negative.
Assessment · This quarter calls for attention to lower operating income and a greater investment burden alongside revenue growth. Net cash provides a buffer, but production starts in new businesses alone do not establish investment recovery or margin improvement.
Key management and company statements
Earnings release · Short original excerpt“Tesla Semi and Megapack 3 remain on schedule for production starting in 2026.”Meaning · Tesla Semi and Megapack 3 remain on schedule to begin production in 2026.
Context · This is original wording from company earnings materials, not an individual CEO or CFO statement. Production-start plans are not equated with realization of large revenue amounts.
Original statement ↗01 Revenue, operating income and results versus expectations
Year over year · Revenue 22.496 → 28.236 B$ (+25.5% · +5.740 B$), Operating income 0.923 → 0.398 B$ (−56.9% · −0.525 B$).
Quarter over quarter · Revenue 22.387 → 28.236 B$ (+26.1% · +5.849 B$), Operating income 0.941 → 0.398 B$ (−57.7% · −0.543 B$), Operating margin 4.2% → 1.4% (−2.8%p).
Automotive, energy and services revenue all increased, but total-company operating income declined. Gross margin of approximately 16.8% and higher operating expenses pressured profitability.
02 Earnings sustainability · From operating income to net income
Operating expenses rose approximately 47%, from 2.955 → 4.353 B$. Despite revenue growth, operating income fell from 0.923 → 0.398 B$, indicating deterioration in total-company operating profitability.
Unrealized gains of 1.005 B$ on the SpaceX stake and unrealized digital asset losses of 0.112 B$ were reflected in net income. These are distinguished from core automotive and energy operating performance.
Consolidated net income was 1.128 B$, versus net income attributable to common shareholders of 1.114 B$. The report header and existing quarterly data retain attributable net income, while the OCF reconciliation uses consolidated net income.
- Operating income
- 0.398 B$
- Net non-operating income/loss
- 0.931 B$
- Income tax expense
- −0.201 B$
- Consolidated net income
- 1.128 B$
Net income of 1.114 B$ in the existing quarterly data is attributable to the parent/shareholders. Its scope differs from consolidated net income used in the cash flow reconciliation.
03 Cash flow quality · Net income → OCF → FCF
CapEx of 5.789 B$ exceeded OCF of 4.697 B$, producing FCF of −1.092 B$. Higher investment spending is the main cash outflow driver; valuation gains are not equivalent operating cash inflows.
- Consolidated net income
- 1.128 B$
- Total net adjustments, including non-cash items and working capital¹
- 3.569 B$
- Operating cash flow
- 4.697 B$
- Cash CapEx
- −5.789 B$
- FCF
- −1.092 B$
¹ Total net adjustments calculated as OCF minus net income. This is not a single disclosed line item; it combines non-cash items, working capital, classification differences and other adjustments.
FCF versus the previous quarter · 1.444 → −1.092 B$, a 2.536 B$ deterioration.
04 Financial capacity · Net debt and payment obligations
Previous-quarter net cash · 2026-03-31
Cash and liquid assets 44.743 / Borrowings 9.019 B$
Current-quarter net cash · 2026-06-30
Cash and liquid assets 43.524 / Borrowings 9.061 B$
Net debt deteriorated by 1.261 B$ from the previous quarter. The carrying amount of current borrowings is 1.340 B$. This may differ from the principal maturity schedule.
Ending cash and liquid assets of 43.524 B$ and borrowings of 9.061 B$ imply a net cash position. Borrowings are carrying amounts separated from finance leases, and current net cash does not eliminate all future investment commitments.
Common definitions · Cash and liquid assets = cash equivalents + current investments and deposits. Borrowings = carrying amount of interest-bearing debt (current + non-current), excluding separate lease liabilities. This differs from total liabilities of 61.005 B$. Restricted cash, non-current securities and non-current deposits are excluded from cash and liquid assets.
05 Investment, capital allocation and cash recovery
The company projected 2026 CapEx above 25 B$. Subtracting first-half cash CapEx of 8.282 B$ implies required second-half spending above 16.718 B$. This is a lower bound derived from the annual plan, not a fixed cash expenditure schedule.
This quarter, cash CapEx/revenue was 20.5% and FCF/revenue was −3.9%. These ratios should not be used as a simple ranking of companies with different business models and FCF definitions.
06 Next-quarter and full-year outlook and implications
The company plans to begin Semi and Megapack 3 production and expand AI and robotics facilities. New production capacity must be assessed separately from actual demand, utilization and earnings contributions.
A second-half investment plan larger than the first half indicates that current cash capacity can be deployed, but the timing of conversion into revenue, earnings and recovered cash is not fixed.
RPO / Backlog
QoQ 10.150 → 10.050 B$ (−1.0% · −0.100 B$).
YoY 10.380 → 10.050 B$ (−3.2% · −0.330 B$).
RPO for contracts longer than 1 year in the Energy Generation and Storage business. Not total-company or automotive order backlog; regulatory credit contracts are separate · Contract balances are not equivalent to committed next-quarter revenue or cash inflows. RPO scope differs across companies.
RPO disclosure ↗Quarterly results · CY-aligned view
Amounts in B$. The table shows all 4 quarters of the prior year and the current year's reported quarters, based on the report's CY-aligned year. Each fiscal quarter is assigned to the calendar quarter with the greatest overlap in its actual reporting period; the original FY/CY label and start and end dates are also shown. Amounts have not been recalculated into actual calendar quarters.
| CY alignment | 2025 · 4 quarters | 2026 · 2 quarters | Change this quarter | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Metric | 2025 total4-quarter totalBalances are at period end | 1Q2025 Q125-01-01 ~25-03-31 | 2Q2025 Q225-04-01 ~25-06-30 | 3Q2025 Q325-07-01 ~25-09-30 | 4Q2025 Q425-10-01 ~25-12-31 | 2026 YTD2-quarter totalBalances are at period end | 1Q2026 Q126-01-01 ~26-03-31 | 2Q2026 Q226-04-01 ~26-06-30 | QoQvs 2026 Q1 | YoYvs 2025 Q2 |
| Revenue | 94.827 | 19.335 | 22.496 | 28.095 | 24.901 | 50.623 | 22.387 | 28.236 | +26.1%+5.849 B$ | +25.5%+5.740 B$ |
| Operating income | 4.355 | 0.399 | 0.923 | 1.624 | 1.409 | 1.339 | 0.941 | 0.398 | −57.7%−0.543 B$ | −56.9%−0.525 B$ |
| Operating margin | 4.6% | 2.1% | 4.1% | 5.8% | 5.7% | 2.6% | 4.2% | 1.4% | −2.8%p | −2.7%p |
| FCF | 6.220 | 0.664 | 0.146 | 3.990 | 1.420 | 0.352 | 1.444 | −1.092 | −2.536 B$ | −1.238 B$ |
| Operating cash flow | 14.747 | 2.156 | 2.540 | 6.238 | 3.813 | 8.634 | 3.937 | 4.697 | +19.3%+0.760 B$ | +84.9%+2.157 B$ |
| Cash CapEx | 8.527 | 1.492 | 2.394 | 2.248 | 2.393 | 8.282 | 2.493 | 5.789 | +132.2%+3.296 B$ | +141.8%+3.395 B$ |
| Net cash | 35.906 | 29.752 | 29.826 | 34.186 | 35.906 | 34.463 | 35.724 | 34.463 | −1.261 B$ | +4.637 B$ |
| Cash and liquid assets | 44.059 | 36.996 | 36.782 | 41.647 | 44.059 | 43.524 | 44.743 | 43.524 | −2.7%−1.219 B$ | +18.3%+6.742 B$ |
| Borrowings | 8.153 | 7.244 | 6.956 | 7.461 | 8.153 | 9.061 | 9.019 | 9.061 | +0.5%+0.042 B$ | +30.3%+2.105 B$ |
Indented rows are components of, or reference items for, the parent metric. Net cash = cash and liquid assets − borrowings. Depending on company definitions, FCF may include additional adjustments such as lease principal and therefore differ from operating cash flow − cash CapEx. See the cash flow discussion for the detailed definition.
Annual totals and year-to-date totals precede the quarters for each year. Revenue, earnings and cash flow are sums of quarterly values; operating margin equals total operating income divided by total revenue; net cash, cash and borrowings are the final quarter's ending balances. Do not make a simple annual comparison of totals covering different period lengths.
Net cash = cash and liquid assets − borrowings. A negative value indicates net debt. Changes in FCF and net cash are shown as absolute amounts in B$. Quarterly values were not adjusted to match disclosed annual totals.
Comparison bases, calculations and quarterly sources
Calculations and presentation · Amounts in B$. US disclosures in millions of dollars were preserved by dividing by 1,000. Where only cumulative cash flow was available, the preceding cumulative amount in the same fiscal year was subtracted. YoY, QoQ and margins were calculated before display rounding. Earnings growth from negative or 0 bases is shown as a sign change and/or absolute amount.
Opinions and outlook · Management quotations include short original excerpts and translations. Unless identified as earnings call transcripts, quotations come from earnings releases. Interpretations and implications are the author's judgments. No numerically unverified probabilities of achieving targets are assigned.