Tesla's Q2 Financials Show Revenue Growth But Plummeting Profit Margins

Tesla posted its financial statement for the second quarter of the year this afternoon. Earlier in July, we learned that the American automaker had had a good quarter in terms of sales, growing 25 percent year over year. Fans hoping that sales increase would result in a plenty profitable Tesla may be disappointed, though. Revenues are up but so are expenses, and the company’s once-enviable double-digit profit margin has fallen to just 1.4 percent.

Tesla brought in $20.5 billion from its electric vehicle business, a 23 percent increase year over year, and just $146 million came from automotive regulatory credits. Credits have been a key to Tesla’s profitability in previous challenging quarters, but they were abolished in the United States with Musk’s blessing in 2025.

There was growth from its energy and storage business, which grew 13 percent year over year to revenues of $3.1 billion, but the most growth was in Tesla’s services, which doubled, bringing in $4.6 billion. Tesla’s shift from a one-time purchase to a monthly subscription for its much-criticized FSD partially automated driver assist—something tied to CEO Elon Musk’s gargantuan remuneration package—was a big help here.

Overall, total revenues were up 26 percent, to $28.2 billion.

But the cost of doing business went up more. Tesla’s operating expenses went up 47 percent to $4.4 billion, and income from those operations fell by 57 percent year over year to $398 million. The company is still profitable—it generated $1.1 billion for the quarter, but that’s 5 percent less than the same three months last year.

In large part, that’s because Tesla has been spending heavily. Its capital expenditures grew by 142 percent to $5.8 billion, and free cash flow is currently negative $1.1 billion. That’s an 848 percent drop compared to last year, but Q2 2025 was barely positive either. For a more short-term comparison, Tesla ended last quarter with a free cash flow of more than $1.4 billion. It’s also lost another $1.2 billion from its investments.

Despite so much of Tesla’s revenues coming from cars, then solar and batteries, its spending is not on developing a new line of cars or even finally making those solar roof tiles we were promised a decade ago. It’s still all about AI, humanoid robots, and more robotaxi rollouts, despite a high preponderance of crashes in Texas, including one involving a teleoperator and a Houston tree stump.

In its statement to investors, Tesla says that it anticipates beginning production for its humanoid robots later this year, and that robotaxi deployments are “in line in seven major metros,” although it acknowledges that at least one of these requires the assent of California regulators, who we have seen are notably less permissive than equivalents in Arizona, Florida, Nevada, or Texas.