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Tesla's Q2 revenue exceeded expectations, but EPS fell short of expectations, with free cash flow turning negative at $1.1 billion

Tesla announced its second-quarter financial report, with revenue of $28.24 billion, exceeding market expectations of $25.71 billion, a year-on-year increase of 26%; adjusted earnings per share of $0.33, significantly lower than the expected $0.51; net profit of $1.11 billion, a year-on-year decrease of 5%. Gross margin fell to 16.8%, down from 17.2% in the same period last year and below the market expectation of 19.4%. Operating expenses surged 47% year-on-year to $4.35 billion, and operating profit margin plummeted from 4.1% to 1.4%, mainly affected by AI and R&D investments.Free cash flow turned negative at $1.1 billion, compared to positive $146 million in the same period last year, with capital expenditures soaring 142% year-on-year to $5.79 billion. The company stated that investments in capacity construction and infrastructure for AI computing power, battery materials, and semiconductor manufacturing are ongoing. Revenue from the automotive business was $20.52 billion, a year-on-year increase of 23%, energy business revenue was $3.14 billion, an increase of 13%, and revenue from services and other businesses was $4.58 billion, an increase of 50%. FSD subscription users reached 1.48 million, a quarter-on-quarter increase of 56%. Tesla's stock price has fallen approximately 17% year-to-date.
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