Skip to content
    TSLA
    Earnings call· Jun 2026(Q2 FY26)

    Tesla, Inc. TSLA

    Jul 22, 2026 Source

    Executive summary

    Tesla Q2 FY26 — Record Deliveries and Massive AI/Robotics Investment Cycle

    Tesla delivered record Q2 results, driven by strong Model Y demand and increasing FSD adoption, leading to the largest order backlog since 2023. The company is in a massive investment cycle, significantly increasing CapEx for AI, robotics, and manufacturing expansion, which impacted free cash flow and margins. Management expressed high confidence in the long-term returns from these strategic bets, particularly in Optimus, Cybercab, and AI chip development, despite near-term supply chain and regulatory challenges.

    Highlights

    5

    • Achieved record Q2 deliveries globally with sequential growth across Americas (60%), APAC (27%), and EMEA (12%).

    • Model Y is the best-selling car of any kind in the world, setting records in key markets.

    • FSD attach rates continue to improve, reaching nearly 1.5 million paid customers globally, with 55% upfront purchases and 45% subscriptions.

    • Energy storage deployments increased 53% sequentially to 13.5 GWh, marking the second largest quarter for the energy business.

    • Service and other margins improved sequentially from 9.2% to an all-time high of 14.1%.

    Concerns

    5

    • Automotive margins, excluding regulatory credits, declined sequentially from 19.2% to 16.3% due to non-recurring Q1 benefits and rising interest rate subvention costs.

    • Energy gross margins declined from 39.5% to 20.4% due to a $240 million warranty true-up, non-recurring Q1 tariff benefits, and increased competition.

    • Free cash flow was negative for the quarter, primarily due to CapEx more than doubling sequentially.

    • Production growth is limited by supply chain constraints, including batteries and electronic components.

    • Operating expenses are expected to continue growing in 2026 and beyond, driven by significant R&D and pre-production ramp costs.

    Guidance & targets

    11
    CategoryTargetConfidence
    CapEx
    more than $25 billion
    high materiality
    High
    CapEx growth timeline
    grow for the next two to three years
    high materiality
    High
    Energy business gross margin
    normalize at a gross margin rate in the mid- to low 20% range
    medium materiality
    Medium
    Robotaxi fleet ramp
    accelerate throughout the year
    high materiality
    High
    Operating expenses growth
    continue to grow in 2026 and beyond
    medium materiality
    High
    Robotaxi unsupervised miles growth
    continue growing at such a large rate through the rest of this year
    high materiality
    High
    Time to launch robotaxi in new cities
    continue to trend towards zero
    medium materiality
    Medium
    Optimus 4 production
    order of magnitude more production than Optimus 3
    high materiality
    Medium
    AI chip production (upgraded AI chip)
    reaches production around the middle of next year
    medium materiality
    Medium
    AI chip production (AI5)
    hopefully is in volume production around the middle of next year
    medium materiality
    Medium
    Semi autonomy
    probably around the end of this year or early next year
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Automotive
    Automotive gross margins, excluding regulatory credits, declined sequentially from 19.2% to 16.3%. This was due to a $230 million benefit from warranty true-downs and tariff relief in Q1 that did not repeat, and rising interest rate subvention costs recognized as a revenue offset.
    Gross margin (excluding regulatory credits): 16.3%Sequential decline: 290 bpsQ1 benefit (warranty true-downs and tariff relief): $230 million
    		———16.3%
    Energy Generation and Storage
    Energy storage deployments reached 13.5 GWh, a 53% sequential increase. However, energy gross margins declined from 39.5% to 20.4% due to a $240 million warranty true-up related to vendor cell issues, non-recurring Q1 tariff benefits, and increased competition leading to lower ASPs for industrial storage. The long-term gross margin target is mid- to low 20% range.
    Deployments: 13.5 GWhSequential increase: 53%Gross margin: 20.4%Sequential decline: 1910 bpsWarranty true-up: $240 millionQ1 tariff benefits (non-recurring): >$200 million
    		——53%20.4%
    Service and Other
    Service and other margins improved sequentially from 9.2% to an all-time high of 14.1%. This was driven by an uptick in volume and better cost management of the vehicle fleet supporting businesses like used cars, supercharging, service centers, and insurance. This segment also includes investments for future robotaxi scaling.
    Gross margin: 14.1%Sequential improvement: 490 bpsAll-time high: Yes
    		———14.1%

    Operational metrics

    19
    Q2 Deliveries Sequential Growth
    60%sequential
    Q2 FY26

    Record Q2 deliveries globally with sequential growth across regions.

    Q2 Deliveries Sequential Growth
    27%sequential
    Q2 FY26

    Record Q2 deliveries globally with sequential growth across regions.

    Q2 Deliveries Sequential Growth
    12%sequential
    Q2 FY26

    Record Q2 deliveries globally with sequential growth across regions.

    FSD subscription at delivery
    55%
    Q2 FY26

    55% of deliveries in North America had FSD subscription enabled at the time of delivery.

    FSD paid customers
    1.5 million
    Q2 FY26

    Overall FSD attach rates continue to improve, reaching nearly 1.5 million paid customers globally.

    Automotive gross margin (ex-credits) Q1 benefit
    $230 million
    Q1 FY26

    This benefit did not repeat in Q2, contributing to the sequential margin decline.

    Energy gross margin Q1 benefit
    >$200 million
    Q1 FY26

    This benefit did not repeat in Q2, contributing to the sequential margin decline for the energy business.

    Energy gross margin warranty true-up
    $240 million
    Q2 FY26

    This warranty true-up negatively impacted energy gross margins in Q2.

    Net income impact from SpaceX holdings
    $1 billion
    Q2 FY26

    Positive impact on net income, offset by FX and Bitcoin losses.

    Net income impact from FX
    $300 million
    Q2 FY26

    Offsetting positive impact from SpaceX holdings.

    Net income impact from Bitcoin
    $100 million
    Q2 FY26

    Offsetting positive impact from SpaceX holdings.

    CapEx sequential increase
    more than doubledsequential
    Q2 FY26

    CapEx more than doubled sequentially, contributing to negative free cash flow.

    Debt facilities capacity
    $30 billion
    Q2 FY26

    Opportunistically securing debt facilities to borrow up to $30 billion to accelerate investments.

    Robotaxi unsupervised miles driven
    380,000 miles
    To date

    The robotaxi program has an impeccable safety record over 380,000 miles of unsupervised operation.

    Robotaxi unsupervised miles growth rate
    more than 10%week-over-week
    Weekly

    Very high compound growth rate in miles driven for robotaxi.

    Robotaxi markets
    7
    Q2 FY26

    The Tesla Robotaxi fleet has expanded to a total of seven markets in the U.S.

    Optimus production target (aspirational)
    10 million unitsvs 1 million for Optimus 3
    Annual

    Aspirational target for Optimus 4 production, an order of magnitude more than Optimus 3.

    Supercharger power capacity
    7 gigawatts
    Current

    Tesla has approximately 7 gigawatts of power at its superchargers, which can be used for distributed AI compute with megapods.

    US power production vs usage
    1.2 or 1.3 terawattsvs 0.5 TW average usage
    Current

    The US has 2.5x as much power generation as average usage, implying potential to double energy output with batteries.

    Industry KPIs

    6
    MetricValueDetails
    Order book backlogLargest order backlog
    Warranty recall costs$240 millionUSD
    Autonomous robotaxi metrics380,000 milesmiles
    Vehicle deliveries wholesalesRecord Q2 deliveries
    Energy storage battery capacity13.5 GWhGWh
    Ev unit volumes mix segment economicsModel Y best-selling car

    Product announcements

    8
    ProductTypeDetails
    Cybercablaunch
    Optimuslaunch
    Tesla Semi-trucklaunch
    Megapack 3launch
    Lithium Refinery / Cathode Refinerylaunch
    Solar Panel Productionexpansion
    Terafabroadmap
    Megapod designlaunch

    Deals & partnerships

    5
    SamsungInvestment in AI compute manufacturingmultibillion dollar

    Samsung is making multibillion-dollar investments in building a fab in Texas, which will be significantly dedicated to future Tesla projects, including AI compute for Optimus and robotaxi.

    TSMCInvestment in AI compute manufacturingtens of billions of dollars

    TSMC is investing tens of billions of dollars in building a fab in Arizona to produce AI compute for Optimus and robotaxi.

    PanasonicInvestment in battery cell productionmany billions

    Panasonic has invested many billions in increasing battery cell production, supporting Tesla's scaling efforts.

    MicronMemory allocation for Teslayears to come

    Micron is providing Tesla with a very significant memory allocation on reasonable terms, which is appreciated given the current pricing of memory.

    SpaceXCollaboration and investment

    Tesla has a deepened relationship with SpaceX through an investment and framework agreement, allowing collaboration on projects like Terafab and Digital Optimus. SpaceX also provides the big model that manages Digital Optimus, and Starlink is being integrated into Tesla vehicles.

    Risks & headwinds

    10
    Supply chain limitations

    Production growth will be limited

    Mitigation: Tesla team is working actively to unblock obstacles by securing strategic deals with suppliers.

    Commodity price increases

    add to our costs

    Interest rate changes

    add to our costs

    Mitigation: Interest rate subvention costs are recognized upfront as a revenue offset, impacting automotive margins.

    Increased competition in industrial storage

    ASPs for industrial storage is coming down

    Operating expenses growth2026 and beyond

    continue to grow in 2026 and beyond

    Mitigation: These are largely driven by R&D for new products and AI initiatives, viewed as necessary investments for future returns.

    Litigation expensesQ2 FY26

    charges related to litigation expenses in the quarter

    Robotaxi safety and regulatory scrutiny

    If we injure even one person, it will be worldwide headline news. And regulators will immediately clamp down on our activities.

    Mitigation: Going as fast as humanly possible while ensuring no harm to anyone, aiming for 'March of 9s' reliability. Focusing on performance to drive regulatory adoption.

    Optimus production scaling difficulty

    This is going to be the hardest product to scale manufacturing that we've ever made at Tesla because everything on the robot is new.

    Mitigation: Building up the supply chain in its entirety or in-housing production. Optimus 4 will be much more vertically integrated.

    AI chip constraint for Optimus

    constrained in our ability to scale Optimus production because we simply won't have enough AI chips.

    Mitigation: Terafab initiative to solve memory, logic, and packaging for AI chips. Development fab in Austin for fast iterative chip design.

    Cellular connectivity gaps for Robotaxi

    cellular coverage is terrible or sometimes nonexistent

    Mitigation: Integrating Starlink into Cybercab and all vehicles to ensure ubiquitous coverage and prevent robotaxis from getting stuck.

    What to watch in Q3 FY26

    5

    Terafab location announcement

    Next quarter
    CurrentLocation to be announced soon
    TargetSpecific location and detailed plans announced

    Why it matters

    Terafab is crucial for scaling Optimus production by providing necessary AI chips, impacting Tesla's long-term AI and robotics roadmap.

    The Terafab, we expect to announce the location soon and provide sort of more details about our plans in that regard, which we'll leave that to the product sort of the launch announcement rather than try to squeeze it into an earnings call because I think this is a very big announcement and to have its own sort of day in the spotlight and not be sort of squeezed into an earnings call.

    Q&A highlights

    6

    Are suppliers investing alongside Tesla for Optimus manufacturing, or is Tesla mostly in-sourcing due to the lack of an existing supply chain?

    Suppliers like Samsung, TSMC, and Panasonic are making significant investments in support of Optimus and robotaxi, particularly for AI compute and battery cell production. Tesla also in-sources when suitable partners are not found, leveraging its manufacturing engineering team.

    “our suppliers have been great, and they've made -- they have made and are making tremendous investments in support of Optimus and robotaxi and whatnot. Samsung and TSMC, in particular, are building fabs at TSMC in Arizona and Samsung in Texas and putting in tens of billions of dollars for -- to build AI compute for Optimus and robotaxi.”

    asked by Andrew Percoco · answered by Elon Musk

    2 min read7 chapters

    Detailed Narrative

    01

    Record Deliveries and FSD Demand

    Tesla achieved record Q2 deliveries, with Model Y becoming the best-selling car globally. The company noted a significant demand driver from Full Self-Driving (FSD) capabilities, particularly in approved locations, where FSD take rates are very high. This has led to the largest order backlog since 2023, prompting a focus on increasing production across all factories, though supply chain limitations remain a constraint.

    02

    Massive Investment Cycle and CapEx Strategy

    The company is undergoing a 'massive CapEx year,' with investments expected to exceed $25 billion in FY26 and continue growing for the next two to three years. These investments are directed towards scaling the robotaxi fleet, Optimus production, semiconductor fabs, solar manufacturing, and AI compute infrastructure. Management emphasizes a strategy of spending as fast as possible without being wasteful, prioritizing speed for higher net present value outcomes.

    03

    Optimus and AI Chip Development

    Optimus, the humanoid robot, is highlighted as potentially Tesla's biggest product, despite being a complex problem with no existing supply chain. Production has started, with a focus on achieving human-level dexterity and generalized task capabilities. Tesla is also investing in Terafab for AI chip production, with equipment orders placed for a development fab in Austin, aiming for rapid iterative chip design and vertical integration for future Optimus models (Optimus 4).

    04

    Robotaxi Program and Scaling

    The robotaxi program is operating with an 'impeccable safety record,' having driven over 380,000 miles of unsupervised operation across six cities in two states with zero notable incidents. The fleet is growing at double-digit rates week-over-week, and the company expects the time to launch in new cities to trend towards zero. The Cybercab has started production, but scaling will require accumulating specific driving data for its new chassis.

    05

    Energy Business Growth and Challenges

    The energy business is growing incredibly fast, with 13.5 GWh of energy storage deployed in Q2, a 53% sequential increase. However, gross margins declined due to a $240 million warranty true-up📎 and non-recurring📎 tariff benefits from Q1, as well as increased competition. Long-term, the energy business is expected to normalize📎 at mid-to-low 20% gross margins, with strong demand anticipated from AI data centers and overall electrification.

    06

    SpaceX Collaboration and Starlink Integration

    Tesla continues to benefit from its relationship with SpaceX, deepening it through an investment and framework agreement. Collaborations include Terafab and Digital Optimus. Starlink is being integrated into Cybercab and all Tesla vehicles to ensure ubiquitous connectivity, crucial for robotaxi operations and enhancing in-car entertainment and productivity, especially in areas with poor cellular coverage.

    07

    Financial Performance and Margin Dynamics

    Automotive gross margins (ex-credits) declined sequentially to 16.3% due to the absence of Q1 warranty true-downs and tariff relief, and rising interest rate subvention costs. Operating expenses increased due to R&D and pre-production costs. Net income was positively impacted by a $1 billion mark-to-market gain on SpaceX holdings, offset by FX and Bitcoin losses. Free cash flow was negative due to the significant CapEx ramp.

    AI-generated summary of the company’s earnings call. Not investment advice.