Tesla’s dramatic spending obscures core business strength

Hey, let’s not forget the little guys! And by “little guys” we mean Tesla. We don’t make the rules: When one of your companies sets the tone for the entire IPO market, we get to call your EV company one of the little guys.

And right now, Tesla’s looking like the little engine that could…n’t quite.

The company reported weaker-than-expected earnings for Q2 2026, with free cash flow dropping for the first time in over two years, per the Wall Street Journal.

Ahead of its most recent earnings report, released July 22, Tesla had been in something of a stock price nosedive, dropping 11% in July and 17% for the year as of the June 21 close, according to CNBC.

Like anyone with a star sibling, Tesla’s been suffering from some unfair comparisons. “The stock is increasingly being valued on robotaxi and humanoid developments rather than core auto fundamentals—with a potential SpaceX acquisition adding a premium to our valuation,” Tom Narayan, global autos lead equity analyst at RBC Capital Markets, wrote, per Axios.

But Tesla’s core auto business is actually doing fine. Revenue climbed 26% from the year prior to $28 billion, with automotive business revenue jumping 23% compared with last year. Meanwhile, energy business (industrial and residential battery storage) revenue rose 13% from last year to $3 billion for the quarter. 

Earlier this month, Tesla said it sold 480,126 electric vehicles around the globe in Q2, a nearly 25% climb from the same period last year, according to the Journal. That jump in deliveries was aided by EV demand amid rising fuel prices, especially outside the US.

Still, for investors, it’s hard not to be spooked by Tesla’s heaving spending. Tesla CFO Vaibhav Taneja said the company plans to spend over $25 billion this year on investments in the company’s robotaxis and humanoid robots, adding that capital expenditures will grow in the next two to three years. As of Q2’s end, Tesla had $36.8 billion of cash and equivalents on its balance sheet.

“This is a massive capex year, but I’m confident that all the things that we’re investing in will yield incredible returns,” CEO Elon Musk said on Tesla’s earnings call.

Not everyone else is so confident. “Monetization remains the central concern following the earnings miss,” Ryan Lee, SVP of product and strategy at Direxion, an ETF provider, told Reuters. “The ⁠question is how quickly those investments can begin supporting the valuation.”