Tesla Sales Up, but Profits Squeezed as Costs Surge
Tesla’s second-quarter revenue rose 26%, but net profit fell 5% as operating expenses jumped 47%, largely driven by AI investments, squeezing the profit margin to 1.4%.
Tesla reported its Q2 financial results after market close on Tuesday, revealing a mixed picture: while vehicle sales grew strongly, profitability took a hit due to soaring costs.
Sales of electric vehicles increased 25% year-over-year, and automotive revenue reached $20.5 billion, up 23%. Revenue from automotive regulatory credits was only $146 million, as such credits were abolished in the U.S. in 2025 with CEO Elon Musk’s blessing. The energy generation and storage business grew 13% to $3.1 billion, but the biggest jump came from services, which doubled to $4.6 billion. This was boosted by Tesla’s shift to a monthly subscription for its controversial FSD partially automated driving system—a key part of Musk’s massive compensation package.
Total revenue rose 26% to $28.2 billion. However, costs rose even faster. Operating expenses surged 47% to $4.4 billion, and operating income plunged 57% to $398 million. The company remained profitable, generating net income of $1.1 billion, but that is 5% lower than the same period last year. The once-enviable double-digit profit margin has fallen to just 1.4%.
