Key facts
- Tesla's stock fell 13.5% on Thursday, one of its largest single-day losses.
- The company reported Q2 earnings of 31 cents per share, missing analyst expectations of 51 cents.
- Tesla's Q2 capital expenditure surged 142% year-over-year to $5.8 billion.
- The company reported a negative free cash flow of $1.1 billion in Q2, its first in over two years.
- CEO Elon Musk urged accelerated AI and capital expenditure spending, prioritizing speed over extreme efficiency.
- Total capital expenditure for Tesla is expected to exceed $25 billion this year.
Tesla's stock experienced a significant decline of approximately 13.5% on Thursday, marking one of the company's largest single-day market losses. This downturn follows a disappointing second-quarter earnings report where the company posted 31 cents per share, falling short of Wall Street's expected 51 cents, although revenue predictions were surpassed. The automaker has seen its market value decrease by about 27% this year, fueled by investor concerns over substantial capital expenditures and weaker-than-expected profits.
CEO Elon Musk urged Tesla to accelerate its spending on artificial intelligence and capital projects as quickly as possible, even if some funds are wasted, stating that extreme capital efficiency would slow progress. This directive comes as Tesla's Q2 capital expenditure soared 142% year-over-year to $5.8 billion, contributing to a negative free cash flow of $1.1 billion for the first time in over two years. The company anticipates total capital expenditure to exceed $25 billion this year, with CFO Vaibhav Taneja indicating plans to secure up to $30 billion in debt facilities to support this investment.
Investors on Wednesday's earnings call questioned the timelines for Tesla's driverless Robotaxi service and Optimus humanoid robot, both heavily promoted by Musk but experiencing slow rollouts and missed targets. Musk attributed the Robotaxi's slow progress to safety concerns and the potential for negative media attention and regulatory crackdowns. He reiterated his belief that Optimus could become Tesla's biggest product but acknowledged numerous hurdles.
The broader market also experienced a downturn on Thursday, with the Nasdaq falling over 2%, its lowest level since early May. Concerns about heavy AI spending by large technology companies, coupled with rising oil prices and bond yields, contributed to the market's decline. Alphabet, another of the "Magnificent Seven" megacap companies, also saw its stock drop 6.5% after reporting increased spending and its first cash burn.