Tesla reported Q2 2026 earnings Wednesday, revenue of $28.24 billion, up 26 percent year over year, beating the $26.71 billion consensus. Record deliveries of 480,126 vehicles. Everything on the top line was fine. Everything underneath was not.
Adjusted EPS came in at $0.33, missing the $0.54 consensus by 39 percent. Operating profit fell 57 percent year over year to $408 million on a 1.4 percent operating margin.
Gross margin dropped to 16.8 percent, well below the 19.4 percent analysts expected, as average selling prices fell and the federal EV tax credit, which expired September 30, 2025, killed the regulatory credit market that had been padding Tesla's margins for years. Free cash flow turned negative at minus $1.09 billion.
The specific detail that rattled investors most. Of Tesla's $1.114 billion in reported GAAP net income, approximately $700 million came from an unrealized gain on SpaceX shares, a company Elon Musk also runs, not from Tesla's core operations. Strip that out and the underlying profit picture looks considerably worse.
Capital expenditures hit $5.79 billion as Tesla continues spending aggressively on Cybercab, robotics and AI infrastructure.
Full-year capex guidance is $25 billion. The stock closed at $374, already down 17 percent for the year, and fell further in after-hours to around $356.