Key facts
- Tesla is expected to report its first quarterly cash burn in over two years.
- Capital expenditures for AI and robotics are projected to reach $25 billion this year.
- Tesla's robotaxi service has expanded to include Orlando and Tampa, Florida.
- The company has begun manufacturing its Cybercab robotaxi, with slow deployment expected.
- Analysts forecast a negative free cash flow of $3.3 billion for the second quarter.
Tesla is anticipated to report its first quarterly cash burn in over two years, as significant investments in artificial intelligence and robotics are projected to outpace cash generated by its core automotive and energy operations. CEO Elon Musk has increasingly shifted the company's focus from car manufacturing to developing 'physical AI' businesses like self-driving taxis and humanoid robots, which form a substantial part of Tesla's current valuation.
Investors are expressing growing unease as capital expenditures for AI infrastructure and manufacturing capacity are expected to reach $25 billion this year. Analysts at Morgan Stanley highlighted that as capital expenditures more than double and free cash flow turns negative, investors will be closely watching for evidence that Tesla's spending is effectively strengthening its AI capabilities.
The company's ambitions in autonomous driving and robotics have been a key bet for investors seeking new, high-margin revenue streams. However, progress has been slower than anticipated, with Musk missing some self-imposed deadlines. For instance, the robotaxi service, launched in April of the previous year, was predicted to serve half the U.S. population by the end of 2025, but it remains limited to a few cities. Tesla has begun manufacturing its Cybercab robotaxi, but Musk has indicated that the production ramp-up will be 'agonizingly slow.'
Despite these concerns, Tesla delivered a record number of vehicles in the second quarter, exceeding market estimates, partly due to higher oil prices boosting EV sales, particularly in Europe. Analysts anticipate Tesla will deliver 1.7 million vehicles in 2026, reversing a two-year decline in annual deliveries. Barclays analysts noted that while investors remain focused on AI, a robust automotive business is crucial for financing these investments. However, for the second quarter, the vehicle sales rebound may not fully offset heavy spending, with LSEG data indicating an expected negative free cash flow of $3.3 billion. Analysts project a second-quarter profit of 50 cents per share, up from 40 cents a year earlier, though Deutsche Bank analysts anticipate that the elimination of upfront Full Self-Driving software purchases and low-interest financing may impact profitability. Wall Street expects automotive gross margins, excluding regulatory credits, to decrease to 18.1% in the second quarter from 19.2% in the previous period.