Tesla shares experienced their sharpest decline in over a year following disappointing quarterly results that intensified scrutiny over Elon Musk’s strategic pivot towards artificial intelligence and robotics. The electric vehicle maker, which designs and manufactures electric vehicles, battery energy storage, solar panels, and related products, recorded its first cash burn in two years as profit significantly missed Wall Street’s estimates. This downturn was largely attributed to a surge in spending on ambitious initiatives, which reached US$5.8 billion (A$8.3 billion) for the period.
The company anticipates capital expenditures to exceed US$25 billion this year, with executives forecasting even larger outlays moving forward. “This is a massive capex year,” Musk stated on an earnings call, emphasising the need to invest “as fast as we can” without waste. These planned investments are earmarked for substantial expansion of factory operations, including the production of Optimus humanoid robots, advanced AI development, the autonomous Cybercab, and a larger robotaxi fleet. However, analysts are increasingly questioning when these significant outlays will yield investor returns, especially as Tesla de-emphasises its traditional automotive business. Adjusted earnings fell to 33¢ a share, falling short of the 51¢ average analyst estimate, alongside a negative free cash flow of US$1.09 billion.
Tesla’s shares plunged 14.5 per cent to US$319.69 at the close in New York following the earnings report, marking its biggest intraday decline in over a year. Revenue for the quarter, however, beat market estimates at US$28.2 billion, driven by strong vehicle sales despite lower average selling prices due to incentives. Operating costs surged 47 per cent, and revenue from regulatory credits declined. Despite an increase in full self-driving software subscriptions to nearly 1.5 million, concerns linger over the slow growth of its robotaxi service compared to competitors. Analysts, including Canaccord Genuity’s George Gianarikas, highlighted “stagnant margins, negative free cash flow impacted by long-term investments, and breakthrough promises anchored to timelines [that are] hard to measure and model.”
