AUSTIN, Texas—Tesla reported lower second-quarter earnings as spending on artificial intelligence, robotics and manufacturing expansion rose sharply, even as revenue and vehicle deliveries increased, underscoring the cost of the electric vehicle maker's push into new technologies.
The company said net income for the quarter fell about 5% from a year earlier to $1.11 billion, or roughly 32 cents per diluted share. On an adjusted basis, earnings were about 33 cents per share, below analysts' expectations compiled before the results. Revenue rose 26% year over year to $28.24 billion, exceeding market forecasts.
Tesla attributed the pressure on profitability to significantly higher operating expenses, lower average vehicle selling prices, reduced revenue from regulatory credits and warranty-related charges in its energy business. Research and development spending climbed 49% from a year earlier to about $2.37 billion as the company accelerated investment in artificial intelligence, autonomous driving technology and robotics.
Capital expenditures also increased sharply to about $5.8 billion during the quarter, contributing to negative free cash flow of roughly $1.1 billion, the first such result in more than two years, according to the company and analysts. Chief Financial Officer Vaibhav Taneja said Tesla expects capital spending to exceed $25 billion this year and continue rising in the coming years as it expands production capacity and AI infrastructure.
Tesla delivered about 480,000 vehicles during the quarter, a record for the company, led by Model 3 and Model Y sales. The company also reported continued growth in its energy storage business and an expanding subscriber base for its Full Self-Driving software.
During an earnings conference call, Chief Executive Elon Musk said Tesla would continue investing aggressively in autonomous driving, robotics and related technologies, while emphasizing a cautious rollout of its robotaxi service. Musk said the company intended to spend on capital projects "as fast as we can without it being too wasteful," according to the webcast.
Investors reacted negatively to the earnings miss despite stronger sales. Tesla shares fell more than 4% in after-hours trading following the release of the results as markets weighed the company's rising costs against its long-term growth strategy.
Tesla said it will continue expanding production of vehicles, batteries and robotics while increasing investment in artificial intelligence infrastructure, maintaining its previously announced outlook for elevated capital spending through 2026.
