After two miserable years of declining demand, declining sales, and damage to its brand by Elon Musk’s political activities, Tesla’s road to recovery continues. On the heels of an impressive delivery report, the company released its earnings for the second quarter of 2026 – giving us the latest glimpse into the EV company that Musk has said he wants to transform into a leader in AI and robotics.
Despite that work, Tesla is still a car company. And in the second quarter, it sold an amazing 480,126 cars, almost a 25 percent increase compared to the second quarter of 2025. (For a direct-to-consumer company like Tesla, delivery is a proxy for sales.)
Tesla has certainly done a good job of reducing its inventory, which is good for the balance sheet. But what about those numbers?
Tesla has certainly done a good job of reducing its inventory, which is good for the balance sheet. But what about those numbers?
Tesla said it earned $1.11 billion in revenue on revenue of $28.2 billion in the quarter ended June 30. That’s a 26 percent increase in revenue but a 5 percent increase in profit for the second quarter of 2025, when the company earned $1.17 billion on revenue of $22.5 billion. Tesla exceeded revenue expectations from Wall Street, taking in about $26.4 billion in revenue.
But there were still signs of trouble. The company reported free cash flow of $1.1 billion, a sign that Tesla’s operating income is not enough to cover its capital expenditures. Basically, Tesla spends more money — on AI infrastructure, robotics, and manufacturing — than it earns on car sales and power generation. Last year, some analysts predicted that negative free cash flow could cause the stock to fall. (Tesla’s stock price is down 14 percent so far this year.) The company said it has $43.5 billion in cash, but its capital expenditures rose 142 percent year over year to $5.7 billion this quarter.
In a shareholder briefing, Tesla said it “generated more than $100B in revenue on a trailing twelve-month basis for the first time.” It also ramped up production of the Cybercab at its Gigafactory in Texas, and said production of the Tesla Semi is “going well” at its Nevada facility later this year. It also said it has begun production of Optimus humanoid robots at its Fremont factory after shutting down the Model S and X assembly line.
“Tesla is in its biggest and most exciting investment period,” the company said. “From here, there’s still a lot of hard work as we aim to transform transportation, energy and manufacturing with our best-in-class AI in the real world. Scaling will not be linear, and we’re focused on creating long-term value. We’ve never been more optimistic about the future.”
Gross vehicle margins, which measure revenue without the direct costs of producing a vehicle, remain an important number for Tesla. They fund the company’s multibillion-dollar investment in AI, autonomous driving, and robotics, while also providing protection for Tesla to lower car prices when demand slows.
In the second quarter, Tesla said its gross margin on cars was 16.3 percent, minus income from the sale of regulatory credits (income that will end soon, after the end of the Trump administration’s penalties on automakers that exceed emission standards). That’s up from 15 percent of the margin in Q2 2025, but down from 19.2 percent in Q1 of this year.
Tesla’s energy business remained a bright spot for the company. It reported $3.1 billion in energy and storage revenue, a 13 percent increase over the same period in 2025.
The earnings report is the latest evidence that Tesla is starting to turn the corner after two years of declining sales and falling profits. It also comes as the company faces tough questions about its slow progress in expanding its robotics operations. Tesla’s autonomous car project has fallen far short of Musk’s prediction of covering 50 percent of the US population by the end of 2025. The company recently launched robotaxi services in two Florida cities, Orlando and Tampa, but the crowded tracker shows only a handful of cars available.
Tesla has introduced a new update to Full Self-Driving (v14 Lite) for its car owners, bringing personalized self-driving learning to each Teslas. But the number of crashes involving Tesla drivers using Autopilot and FSD continues to grow at an alarming rate, Electrek reported 207 accidents in May 2026 alone.
