Tesla Profit Slumps as EV Discounts Bite and AI Spending Surges

Tesla entered 2026 after two consecutive annual declines in vehicle sales and the loss of its global EV crown to China’s BYD. After the $7,500 US consumer tax credit expired on Sept. 30, 2025, the Austin, Texas-based company leaned on discounts and financing offers to defend volume. Elon Musk is simultaneously recasting Tesla around artificial intelligence, robotaxis, Optimus humanoid robots and in-house chip production, making the pivot’s cash demands and uncertain returns central to the investment case.

On July 22, Tesla reported revenue of $28.24 billion for the three months ended June 30, up 26% from a year earlier, as deliveries climbed 25% to 480,126 vehicles. Yet discounts and lower regulatory-credit revenue pushed adjusted net income down 17% to $1.15 billion and operating profit down 57% to $398 million. Capital spending surged 142% to $5.79 billion, producing negative free cash flow of $1.1 billion as Tesla funded a semiconductor fab, Cybercab production and Optimus lines.