Tesla, Inc. Q2 FY2026 Earnings Call

· Earnings call transcript and AI-powered summary

Overall Context: Tesla reported strong demand resurgence with record Q2 deliveries and the largest order backlog since 2023. Growth was driven by FSD interest and Model Y popularity. The company is in a heavy investment phase with CapEx more than doubling sequentially, leading to negative free cash flow. Comparisons below are primarily sequential (Q2 vs Q1 2026) unless noted.

Key Financial Metrics

  • Automotive Gross Margins (excl. regulatory credits): 16.3% in Q2, down from 19.2% in Q1. Adjusted for $230M Q1 warranty/tariff benefits that did not repeat, margins were approximately flat. Commodity prices and interest rate subvention costs pressured results.
  • Energy Storage Deployments: 13.5 GWh in Q2, up 53% sequentially (second-largest quarter ever). Gross margins fell to 20.4% from 39.5% in Q1 due to $240M warranty true-up, absence of $200M+ Q1 tariff benefits, and declining ASPs amid competition. Long-term target: mid- to low-20% range.
  • Service & Other Margins: Improved to 14.1% (all-time high) from 9.2% in Q1, driven by higher volume and better fleet cost management.
  • Free Cash Flow: Negative in Q2, primarily due to CapEx more than doubling sequentially. Full-year 2026 CapEx expected to exceed $25B and grow for the next 2-3 years.

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Travis Axelrod : Good afternoon, everyone, and welcome to Tesla's Second Quarter 2026 Q&A Webcast. My name is Travis Axelrod, Head of Investor Relations, and I'm joined today by Elon Musk, Vaibhav Taneja and a number of other executives. Our Q2 results were announced at about 3:00 p.m. Central Time in the update deck we published at the same link as this webcast. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC. During the question-and-answer portion of today's call, please limit yourself to one question and one follow-up. Before we jump into Q&A, Elon has some opening remarks. Elon? Elon Musk : Thank you. So, yes, it's been a great quarter. We achieved record Q2 deliveries. Model Y, I believe it is now, I think it's the best-selling car of any kind in the world and is setting records across the board. So its popularity is increasing tremendously. And we're seeing in locations that have FSD approved, we're seeing a very high take rate of FSD. And in fact, I think, for a lot of people, they're actually buying Tesla full self-driving with a car attached as opposed to a car with FSD. They're coming into our stores in the U.S. and they want the full self-driving and with whatever car comes with essentially

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