Tesla Earnings Miss as AI Expansion Weighs on Cash Flow
Synopsis
The EV maker reported disappointing quarterly profit and negative free cash flow while reaffirming plans to spend more than $25 billion on AI and robotics this year.
Key Highlights
- Tesla posted record vehicle deliveries over the second quarter but fell short of analysts’ profit forecasts for the period.
- The company posted a negative free cash flow of US$1.1 billion, the first such outflow in more than 2 years.
- Tesla will invest over US$25 billion this year on AI, robotaxis and robotics.
Tesla fell short of analysts’ profit targets for the second quarter and also posted negative free cash flow for the first time in over two years. Spending on AI and robotics infrastructure increased markedly. The stock was down almost 4.5% in the after-hours session.
AI Spending Weighs on Results
At more than US$25 billion this year, nearly three times last year’s level, Tesla is going through that data in a plethora of ways to invest in AI-powered self-driving technology, robotaxis and humanoid robots. The company said higher AI-related operating expenses, lower average selling prices and weak regulatory credit revenue pressured profitability.
Capital expenditure reached US$5.8 billion, more than double the level of the previous year. Negative free cash flow fell US$1.1 billion. A cash burn of US$3.3 billion had been anticipated by analysts. Musk had said he was confident that the investments would produce solid returns.
Revenue Beats, Profit Misses
Tesla Q2 Vehicle Deliveries recorded 480,126 vs. 384,122 a year earlier and revenue increased to US$28.24 billion, compared with analysts’ estimates of US$25.71 billion.
Adjusted earnings were 33 cents per share versus forecasts of 51 cents among analysts, while automotive gross margin was reported to be 16.3% against an expected reading of 18.04%.
The company had previously cut dollars from the Model S and Model X, and then last quarter offered less expensive versions of the Model 3 and Model Y, which drove average revenue per vehicle down to US$42,730 from US$45,345.
Energy Storage and Robotaxi Expansion
During the quarter, Tesla released 13.5 GWh of energy storage products compared to 9.6 GWh a year earlier.
The company highlighted it had recently grown its unsupervised robotaxi service in Austin and introduced services in Dallas and Houston. Meanwhile, it operates expanded services to Miami, Phoenix, Las Vegas, Orlando and Tampa.
During the second quarter, Tesla said it ramped up the rollout of its Full Self-Driving (FSD) Supervised software. It was also approved to roll out FSD in the Netherlands, and today a number of other European countries have approved many technologies as well following the Dutch approval. The firm is also awaiting approval in China.
Source: Reuters
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