Tesla’s first-quarter earnings beat Wall Street estimates, but the stock slipped as investors digested plans to spend more than $25 billion this year on AI, chipmaking, and new factories.
The electric vehicle maker reported revenue of $22.39 billion, adjusted earnings of 41 cents per share, and a gross margin of 21.7%, all above analyst expectations. Revenue rose 16% year-over-year, driven by stronger auto sales and higher average selling prices. Net income increased to $477 million, or 13 cents per share, up from $409 million a year earlier.
Yet the results came with a stark warning: capital expenditures will exceed prior guidance by $5 billion, pushing total 2026 spending beyond $25 billion. CFO Vaibhav Taneja said the surge will result in negative free cash flow for the remainder of the year. The announcement erased an initial after-hours stock gain of about 4%, leaving shares over 2% lower in premarket trading the next day.
The spending surge reflects Tesla’s dual push into artificial intelligence and next-generation hardware. The company is ramping AI compute, preparing production lines for the Cybercab robotaxi, Tesla Semi, and Megapack 3, and advancing its Optimus humanoid robot program. Musk said Optimus V3 will be revealed near the start of production, likely July or August, and that the robots could be useful outside Tesla factories by next year.
A major portion of the capex will fund Tesla’s chipmaking ambitions, including the AI5 processor designed for future EVs, training clusters, and Optimus. Musk claimed the chip design is complete, having “taped out” the final stage. A new semiconductor factory, dubbed Terafab, is planned for Austin, Texas.
Meanwhile, Tesla’s core auto business faces mounting pressure. Revenue from the automotive segment rose 16% to $16.2 billion, but the company continues to lose ground to rivals like BYD and Xiaomi, which offer newer, lower-cost models. Tesla confirmed it will introduce more affordable trims of the Model Y and Model 3 to counter the threat.
The company likewise benefited from one-time gains tied to tariffs and warranties, though CFO Taneja said Tesla has not yet received any refunds from the Supreme Court’s February decision striking down parts of the Trump administration’s tariff agenda. Regulatory credit revenue declined as rival automakers face fewer penalties under shifting federal policies.
Energy storage sales slowed, and U.S. Vehicle deliveries remain stagnant, partly due to consumer backlash over Musk’s political activities and a broader slump in EV demand. Still, Tesla reported a rebound in North American demand and noted that its Supercharger network and Full Self-Driving (supervised) subscriptions contributed to revenue growth.
Robotaxi service expanded over the weekend to parts of Dallas and Houston, operating without safety drivers — an “unsupervised” rollout that began limited testing in Austin. The company said robotaxi miles nearly doubled sequentially in Q1, though it does not disclose fleet sizes or the number of unsupervised vehicles in service.
Despite the beat, Tesla’s profits remain modest by its own historical standards. NPR noted this quarter marked the second-worst net profit and vehicle delivery performance in the last 12 quarters, surpassed only by the first quarter of 2025. Yet the results still exceeded analyst expectations, underscoring how low the bar had become.
Why did Tesla’s stock fall after reporting better-than-expected earnings?
The stock declined because investors reacted negatively to the company’s announcement that capital expenditures will exceed $25 billion in 2026, far above prior guidance, signaling years of negative free cash flow ahead.
How is Tesla funding its push into AI and robotics while facing competition in its core auto business?
Tesla is increasing spending on AI chips, factories, and robotics while introducing lower-cost Model Y and Model 3 trims to compete with rivals like BYD and Xiaomi, even as its U.S. Sales stagnate due to political backlash and weaker EV demand.
What progress has Tesla made on its Robotaxi service, and what remains unclear?
Tesla expanded unsupervised Robotaxi service to Dallas and Houston, building on a limited test in Austin, and said robotaxi miles nearly doubled in Q1, but it does not disclose how many vehicles are in service or how many operate without safety drivers.
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