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With its eye on an AI- and robotics-driven future, automaker Tesla boosted its spending to $5.8 billion in the second quarter, sending its free cash flow into the red for the first time in two years despite a surge in revenue.
“This is a massive cap ex year, but I’m confident all the things we’re investing in will yield incredible returns,” Chief Executive Elon Musk told investors on a call Wednesday.
Despite Musk’s confidence, shares fell more than 4% in aftermarket trading Wednesday.
Tesla reported negative free cash flow of $1.1 billion in the second quarter, while its net income fell 5%. Tesla also reported earnings of 33 cents a share, short of Wall Street’s expectations.
Overall, Tesla’s revenue rose to $28 billion, up 26% from the year before. Revenue from its core automotive business—which has struggled against declining demand in the U.S. and increased competition in China—increased by 23% year-over-year.
Tesla’s energy business revenue, which comes from selling industrial and residential battery storage, was $3 billion for the quarter, up 13% from the year before.
The company also increased subscriptions of its automated driver-assist software, called Full Self-Driving (Supervised), to 1.5 million subscribers—a 15.6% gain from the prior quarter and a 56% increase compared with the year before. It sells subscriptions to Tesla owners for $99 a month.
“They’re coming into our stores in the U.S. and saying they want the Full Self-Driving, and with whatever car it comes with, essentially,” said Musk, describing the service as a demand driver.
Regulatory credits—which are sold to other automakers to help them avoid fines related to emissions targets—fell nearly 67% from last year to $146 million. Once a healthy source of profit for Tesla, the U.S. government rolled back fuel economy and emissions rules last year, lessening the need for the program.
Tesla has said it plans to spend up to $26 billion on factory redesigns and expansions this year as it works to pivot its business away from primarily selling EVs toward autonomous vehicles and robotics, neither of which is currently for sale.
Tesla sold 480,126 electric vehicles globally in the second quarter, up 24.9% from the same period last year, the company said earlier this month. Much of that growth came from Europe—where fuel prices have surged amid the war in Iran—and China.
U.S. sales fell around 20% year-over-year in the second quarter, according to industry data provider Motor Intelligence.
Among its largest capital expenditures is a planned chip-manufacturing facility called Terafab, which Tesla is developing in partnership with Musk’s rocket company SpaceX and Intel. Investors and analysts have speculated that Musk could try to merge SpaceX and Tesla into a single artificial-intelligence-focused company.
“There’s more and more overlap, especially with Terafab,” Musk said. “But obviously we can’t talk about, you know, combining companies and that kind of thing on earnings calls. It’s got to be done with the appropriate process.”
The company said it started volume production of its autonomous Cybercab, which doesn’t have a steering wheel or pedals. That vehicle has limited use in Tesla’s autonomous Robotaxi ride-hailing service and isn’t yet available for purchase.
In June, America’s top vehicle-safety regulator, the National Highway Traffic Safety Administration, proposed eliminating the requirement that autonomous vehicles have manual brake pedals—a change seen as highly beneficial to Tesla’s plans.
This month, Tesla expanded the Robotaxi service to a limited area of Miami, Orlando and Tampa, in addition to its limited operations in parts of Austin, Dallas and Houston.
Write to Becky Peterson at [email protected]
