Tesla’s Q2 profit declined year-over-year despite Wall Street forecasts for growth, pressuring margins and free cash flow.
Tesla reported a year-over-year drop in second-quarter earnings, defying Wall Street expectations for growth. Operating margin fell to 1.41% from 4.1% a year ago, while free cash flow turned negative for the first time in two years despite strong sales.
The company’s auto gross margin slipped to 16.3% from 19.2% in a single quarter, and energy margins plunged from 39.5% to 20.4%. Trailing-twelve-month revenue surpassed $100 billion for the first time, but 2026 capital expenditure guidance rose to $25 billion, nearly triple last year’s $8.5 billion.
Tesla ended the quarter with $43.5 billion in cash and its largest order backlog since 2023, though competition from BYD and Rivian intensified in key markets. The stock’s forward P/E exceeds 170x, with a PEG ratio of 4.72.