Tesla’s $25 Billion AI Bet Puts Profits in the Rearview Mirror

Tesla delivered a first-quarter earnings beat that should have been cause for celebration. Instead, investors fixated on what’s coming next: a spending splurge so vast it guarantees the company will burn cash for the remainder of 2026.

The electric-vehicle maker reported adjusted earnings of $0.41 per share for the three months ended March 31, topping the $0.37 consensus estimate. Revenue climbed 16% to $22.4 billion, though that figure fell just shy of analyst expectations. Net income reached $477 million, while free cash flow surprised to the upside at $1.4 billion — a stark contrast to the $1.9 billion outflow some on Wall Street had braced for.

Yet the headline numbers masked a deeper unease. The real story emerged on the earnings call, where CFO Vaibhav Taneja confirmed that capital expenditures would surge past $25 billion in 2026 — a $5 billion increase from the January forecast and nearly triple the $8.6 billion spent in 2025. First-quarter capex alone jumped 67% to $2.49 billion.

The cash is being funneled into two mega-projects. Tesla is building a chip research and fabrication facility called “Terafab” at its Texas Gigafactory site, while also acquiring an unnamed AI hardware company for up to $2 billion in stock and equity awards — roughly $1.8 billion of which is tied to performance milestones. Meanwhile, CEO Elon Musk plans to more than double the company’s AI computing capacity within about six months.

The consequence is unambiguous: Tesla will post negative free cash flow for the rest of the year. The company ended the quarter with nearly $45 billion in liquidity, but that cushion will be tested as the spending machine revs up.

Automaking Still Shines, Energy Stumbles

Beneath the capex shock, the core automotive business showed genuine strength. Vehicle gross margin — excluding regulatory credits — hit 19.2%, the highest in at least a year, buoyed by higher selling prices and declining material costs. The overall automotive margin reached 21.1%, up sharply from 16.3% a year earlier, with tailwinds from stronger North American and Asian demand plus one-time tariff and warranty benefits.

Not everything cooperated. The energy storage segment slid 12% to $2.41 billion, a reminder that Tesla’s diversification push still has uneven patches.

Roadster Delayed Yet Again

Should investors sell immediately? Or is it worth buying Tesla?

Musk’s penchant for ambitious timelines collided with reality once more. The long-promised Roadster — first shown as a prototype in November 2017 — has now been postponed for at least the eighth time. Musk had previously targeted an “end of April” reveal, but on the earnings call he pushed that back to “maybe in a month or so,” meaning late May or June 2026 at the earliest. A production-ready vehicle has yet to materialize.

Robotaxi Expansion and Optimus Ambitions

On the autonomy front, Tesla expanded its unsupervised robotaxi service to Dallas and Houston, adding to existing operations in Austin and the San Francisco Bay Area. The number of FSD subscribers now stands at 1.28 million.

The Optimus humanoid robot is also moving closer to production. Tesla plans to begin manufacturing at its Fremont facility in July or August, targeting a capacity of one million units per year. A second production line is under development in Texas, with a long-term goal of 10 million units annually. Musk cautioned that initial ramp-up would be slow — the robot contains 10,000 individual parts.

Market Punishes the Capex Shock

The stock market delivered a blunt verdict. Tesla shares closed Thursday at around €320, down roughly 4% on the day and about 14% below their level at the start of 2025. The stock has underperformed every other megacap tech name this year. It now trades about 7% below its 200-day moving average, with a relative strength index of 44.7 — neutral territory.

The investment offensive is locked in. Whether Optimus, robotaxis, and AI infrastructure deliver the promised returns will become clear only when the negative cash-flow quarters start piling up on the balance sheet. For now, Tesla is betting billions on a future that hasn’t arrived.

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Tesla Stock: New Analysis - 24 April

Fresh Tesla information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

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Tesla Stock: New Analysis - 24 April

Fresh Tesla information released. What's the impact for investors? Our latest independent report examines recent figures and market trends.

Read our updated Tesla analysis...