# Tesla's revenues are up, but profits squeezed as Musk spends on AI > Source: > Published: 2026-07-22 21:15:19+00:00 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](https://arstechnica.com/cars/2026/07/tesla-sales-increase-by-25-in-q2-2026/), 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](https://arstechnica.com/cars/2024/11/trump-team-puts-ev-tax-credit-on-the-block-tesla-is-on-board-report/) 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](https://arstechnica.com/cars/2026/01/tesla-wants-recurring-revenue-discontinues-autopilot-in-favor-of-fsd/) for its much-criticized FSD partially automated driver assist—something tied to CEO Elon Musk’s [gargantuan remuneration package](https://arstechnica.com/tech-policy/2025/11/elon-musk-wins-tesla-pay-vote-that-could-make-him-a-1-trillion-man/)—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.