Tesla's revenues are up, but profits squeezed as Musk spends on AI

Tesla's Q2 2026 revenues rose 26% to $28.2 billion, but operating expenses surged 47% to $4.4 billion, squeezing net income to $1.1 billion—down 5% year over year—as CEO Elon Musk spends heavily on AI. The company's profit margin fell to 1.4%, its lowest in recent history, as automotive regulatory credits were abolished in the U.S. in 2025.

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.