Tesla Inc. Reports First Cash Burn in Two Years Amid AI Pivot

Following a strategic pivot toward physical AI, Tesla Inc. reported a negative free cash flow of $1.1 billion for the second quarter ending June 30, marking its first cash burn in over two years. While the company exceeded revenue expectations with $28.24 billion, it missed profit forecasts, delivering adjusted earnings of 33 cents per share against an expected 51 cents. This financial strain was driven by a surge in capital expenditures to $5.8 billion, part of a broader plan by CEO Elon Musk to spend over $25 billion this year on AI infrastructure, humanoid robots, and autonomous driving.

Despite the profit miss, Tesla Inc. achieved record vehicle deliveries of 480,126 units, supported by strong demand in Europe and China. However, profitability was pressured by lower average selling prices, a decline in U.S. sales following the end of federal tax credits, and a sharp drop in regulatory credit revenue. To maintain growth, the company introduced new Model Y trims and announced production capacity increases at Giga Berlin.

Musk defended the aggressive spending as a necessary industrial scale-up, citing the $20 billion Terafab chip-building project in Austin involving SpaceX and xAI. While Tesla Inc. began production of the steering-wheel-less Cybercab in Texas, Musk cautioned that the production ramp would be agonizingly slow and that robotaxi income would not be meaningful until 2027. Following the earnings report, shares fell approximately 4% in after-hours trading, erasing roughly $71 billion in market value.