Tesla shares slide as multibillion-dollar capex surge commences

Tesla Inc. spent more money in the second quarter of 2026 than in any prior quarter in the company's 23-year history.

Capital expenditure reached $5.79 billion, rising 142% from a year earlier and more than double the level recorded in the first quarter of 2026, Tesla said July 22 in its second-quarter shareholder update.

The surge is central to CEO Elon Musk's bid transform the leading electric vehicle brand into a diversified developer of AI, robots, autonomous EVs, batteries, energy storage systems and solar panels.

"We're investing a lot in growing the core business and really preparing for the future," Musk said on Tesla's earnings call. "This is a massive capex year, but I'm confident that all the things that we're investing in ... will yield incredible returns, really the best capex returns that we've ever seen."

The second-quarter spending spree drove Tesla's free cash flow to a negative $1.09 billion and weighed more heavily on earnings than Wall Street had anticipated.

Tesla's share price was down more than 13% in morning trading July 23 as investors parsed the mixed results. Year to date, the stock has lost over 26%.

For the second quarter, Tesla posted adjusted earnings of $1.15 billion, or 33 cents per share, down from 40 cents per share a year earlier and more than 38% below the S&P Capital IQ consensus estimate.

Tesla generated $28.24 billion in revenues, up from $22.50 billion in the year-ago quarter and beating the S&P Capital IQ consensus by roughly 7%.

Tesla delivered "uninspiring [second-quarter] results as vehicle and stationary storage margins normalized lower on tariff impact and pricing dynamics" that suggests "lower operating margins going forward," analysts at Oppenheimer said in a July 23 note. "[Tesla] remains in the early stages of an expensive multi-year transition to scaled physical AI operations across multiple form factors."

In the meantime, Tesla's current business continues to be centered around EVs and battery storage.

The company released its battery storage and EV delivery results for the second quarter in early July, showing sales strength in both areas.

Tesla delivered 480,126 EVs in the second quarter, up from 358,023 units in the first quarter and 384,122 in the second quarter of 2025.

Tesla deployed 13.5 gigawatt-hours of battery storage in the second quarter, the company reported July 2, marking its second-highest volume ever after record Q4 in 2025.

Capex surge just starting

Despite the record spending, Wall Street had expected the company to spend more that it did. Tesla's second-quarter capex missed the S&P Capital IQ consensus estimate of $6.4 billion, a trend that continued for the eighth consecutive quarter as Tesla struggled to keep up with Musk's sweeping plans.

CFO Vaibhav Taneja reiterated Tesla's spending forecast for more than $25 billion in capital spending this year, signaling more record capital investment in coming quarters.

"Capex will grow for the next two or three years," Taneja said on the earnings call. In addition to using Tesla's own cash, "we are being opportunistic in securing certain debt facilities that will give us the capacity to borrow up to $30 billion to help accelerate such investments," the CFO added.

Musk and Taneja highlighted Tesla's manufacturing progress across multiple fronts, with several centered around its global headquarters outside Austin, Texas, where production of the self-driving Cybercabs began.

At a separate site near Houston, Tesla is commissioning a third assembly facility for its large-scale energy storage system Megapack, which continues to see strong demand from utilities, independent power producers and data centers.

Tesla is also ramping up its lithium-ion battery manufacturing activity in Texas, including battery cells, cathode materials and lithium refining. Another battery cell factory is under construction in Berlin, Germany.

In California, Tesla is installing equipment to make its humanoid robot Optimus, scheduled for production later this year. A second Optimus production hub recently broke ground in Texas, where the company is accelerating AI training for its robots and vehicles.

In Nevada, Tesla is commissioning an electric semi truck factory.

Meanwhile, in Shanghai, the company is ramping up production at its second Megapack factory, which helped to achieve record storage deployments in Europe, the Middle East and Africa.

Tesla also reported progress on construction and equipment purchases for its Terafab semiconductor plant in Austin said it is making preparations for vertically integrated solar manufacturing operation.

"This is going all the way from silicon refinement to producing the solar cell and then deployment of solar because there's going to be tremendous need for electricity in the future due to electrification of transport and AI, obviously," Musk said.

The CEO responded to an analyst question on the potential of a merger between Tesla and Musk's rocket company Space Exploration Technologies Corp., known as SpaceX.

"There's more and more overlap, especially with Terafab," Musk said, declining to discuss the matter further on the call. "It's got to be done with the appropriate process."