Tesla profit falls as spending rises to meet Musk's goals on AI, robots and robotaxis

Pressured by rising operating costs driven by investments in AI and robotics, Tesla Inc. said profit fell in the second quarter despite higher revenue. 

The Austin electric vehicle, battery and robotics company reported a 5% decline in profit as operating expenses jumped 47%, largely due to increasing spending on artificial intelligence, ramping up for production of robots and other research and development projects.

"It's OK to be a little less capital efficient if we can get things done sooner," CEO Elon Musk told investors and reporters, arguing the spending will drive future gains. "We're doing an incredible amount of construction and production growth in so many different arenas simultaneously." 

Revenue rose 26% to $28.24 billion, largely on strong automotive sales and services revenue. The gain helped push the company's 12-month revenue to more than $100 billion, a first for Tesla. Profit fell to $1.11 billion, well shy of analyst expectations.

Capital expenditures will continuing increasing for the rest of the year, CFO Vaibhav Taneja said, driving full-year spending to more than $25 billion. He also said spending will keep increasing for the next two to three years as Tesla expands its fleet of robotaxis, adds AI infrastructure and builds more production capacity for its Optimus humanoid robot.

Investors, focused on declining profit and rapidly rising costs, drove Tesla shares down about 4.5% in after-hours trading. Through Wednesday's close, they're down nearly 17% this year.

Auto sales were a bright spot. The company said earlier it delivered 480,126 cars to customers in the past three months, up 25% from a year ago, when Tesla was facing backlash over Musk's work in the Trump administration and support for far-right political candidates in the U.S. and abroad. Recent campaign finance reports suggest his political activity continues, as he donated tens of millions to Republicans and their causes through the first six months of 2026.  

Second quarter sales also were up 34% from the January-March first quarter, when Tesla reported deliveries of 358,023 cars.  

Revenue was also boosted by Tesla's energy generation and battery storage business, which had revenue of $3.14 billion, up 13% from a year ago.Increasing subscriptions for its driver assistance feature, called Full Self-Driving (Supervised), also provided a boost. The number of subscribers has reached nearly 1.5 million globally.

The company noted that its Tesla Semi is on track for production this year at a factory in Nevada, but Musk said timing of the Austin-built Cybercab's rollout is uncertain because the company needs more time to test the purpose-built robotaxi's chassis.

EVs less critical

Electric vehicles are becoming less critical to Tesla's strategy, though, and Musk's efforts to turn its focus to AI and robots has fueled both spending and increasing speculation of a merger with SpaceX.

Talk of creating such a mega-company increased in recent weeks amid SpaceX's initial public offering and progress toward building Terafab, on which Tesla is teaming up with SpaceX, xAI and Intel on to build a massive chip-making facility near College Station. It would build chips for broadband internet satellites for SpaceX subsidiary Starlink and the data centers that Musk wants to launch into space.

On Wednesday, he largely sidestepped questions about the possibility of a Tesla-SpaceX merger, saying that while there is overlap between the companies, especially with Terafab, it's not an issue he could discuss on a Tesla earnings call.

Still, the company is working to appease its EV-minded investors. Tesla said earlier this month that the Model Y Long Wheelbase is now available in the U.S. and Puerto Rico, highlighting its extra headroom and legroom for passengers. This week, Tesla expanded its Robotaxi service to Tampa and Orlando, Fla., and began deploying its Bay Area rideshare service for trips to San Francisco International Airport. 

For those using Tesla's driver-assistance features in their own vehicles, Musk boasted that the system would start to remember people's specific interventions and match each person's individual preferences. 

In practice, Tesla's self-driving ambitions have faced setbacks. Federal regulators recently intensified a probe into Tesla's Full Self-Driving system over concerns about the tech's performance in low-visibility conditions. As part of the National Highway Traffic Safety Administration's investigation, the agency has requested performance metrics on how the system handles fog, smoke and glare. It also wants answers to questions about several of Musk's X posts, including one where he wrote, "make your espresso on the road while your Tesla drives itself." 

Tesla has landed itself in trouble more than once with suggestions and marketing that suggest its cars can drive themselves. They cannot.

Robotaxi expansion

Investors expressed dissatisfaction with the scale of Tesla's robotaxi service expansion, pointing to Musk's earlier assertion that the service would be available in half the U.S. by the end of 2025. Attention was also drawn to the Texas-built Cybercab's expected addition to Tesla's robotaxi fleet. Current requirements that all light vehicles contain hand- or foot-operated brake controls are under review as safety regulators consider removing those requirements for vehicles designed never to be operated by a human. 

Tesla executives didn't offer specifics on how many robotaxis or Cybercabs will be on the road, though, or how soon to expect them. Musk noted that Tesla doesn't want to rush the expansion, saying he prefers a cautious approach.

Tesla's Robotaxi-branded operations across Texas have seen hiccups, too. The company's service contributed four of the 21 total crashes reported by robotaxi operators across the state in their latest report to federal regulators. 

Amid the questions, though, it appears Gigafactory Texas is a key to Tesla's latest priorities. Musk said the plant will someday produce 10 million Optimus humanoid robots a year and that construction of a new Optimus site is continuing this summer. Tesla expects to begin Optimus production by the end of the year in Austin and at a retooled EV plant in California.

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