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FollowingTesla expects to report its first quarterly cash consumption in more than two years
Automaker Tesla is expected to report its first quarterly cash consumption in more than two years when it releases second-quarter earnings after the close of trading on Wednesday. This is a warning sign for investors betting that the company will pay off on its investment in robots and autonomous vehicles.
LSEG data showed that the company's free cash flow in the second quarter was negative US$3.3 billion. This is in sharp contrast to the positive cash flow of $1.4 billion in the first quarter, which coincides with Tesla's core automotive business finally recovering. Chief Financial Officer Vaibhav Taneja told investors in April that the company would experience negative free cash flow for the rest of 2026.
Tesla's capital budget this year has exceeded $25 billion, up from about $20 billion three months ago. Nearly $20 billion of this capital budget is spent on artificial intelligence, including Dojo computing, data center expansion, Cybercab and Optimus humanoid robots. Capital expenditures are reportedly expected to reach $6.7 billion this quarter alone. A year ago, Tesla's free cash flow was approximately $5.6 billion.
The automotive business is not the problem
Tesla delivered more than 480,126 vehicles this quarter, a year-on-year increase of about 25%, above analysts 'expectations of 397,000 to 406,000 vehicles, setting its highest in three months. Cheaper Model 3 and Model Y models and broader promotion of Full Self-Driving vehicles were the main reasons for the increase in sales, which accounted for approximately 97% of the total.
Several other factors have contributed to the growth, including a fully upgraded new Model Y, aggressive global pricing strategies, and the fading out of what Deepwater Investment's Gene Munster calls the "electric vehicle winter that began in March 2024."
Tesla's revenue misses expectations
Those businesses that aim to earn back US$25 billion in capital have not yet reached expectations. Tesla's driverless taxi service operates in only a few U.S. cities, its fleet is far smaller than Waymo's, and it is not expected to generate significant revenue until 2027. Cybercab has been put into production, but has not yet been widely used in online ride-hailing services. Optimus robots currently do not contribute any cash flow and are just beginning to be developed.
Analysts remain divided on whether current spending is worth future revenue expectations. Andrew Percoco of Morgan Stanley gave it a neutral rating and raised its target price to $417, saying the scale of driverless taxis was the stock's "most important catalyst."
Looking ahead, JPMorgan predicts Tesla revenue will grow from approximately US$95 billion in 2025 to US$203 billion in 2030, although this forecast relies on products that currently generate little revenue.
For the second quarter, revenue is forecast to be between $26 billion and $28 billion, and adjusted earnings per share are close to $0.50 to $0.55. The energy storage business is a highlight, with a deployment volume of 13.5 GWh, up from 9.6 GWh in the same period last year. Tesla also holds more than $40 billion in cash.
Despite record car deliveries, the stock has fallen about 16% so far this year. At the time of writing, Tesla shares were trading at $382.58, up 3.52%.
