Star Metro - Tesla shares fall as Musk touts ambitious -- and costly -- plans

Elon Musk's fast-growing electric vehicle maker reported second-quarter profits of $1.1 billion, down about five percent from the year-ago level. That translated into 33 cents per share compared with analyst estimates of 53 cents per share.

Revenues rose 26 percent to $28.2 billion.

Tesla had impressed market watchers earlier this month when it released higher-than-expected second-quarter auto sales, due in part to a recovery in European markets.

But the company's earnings press release said profitability was dented by lower vehicle sales prices, lower revenue from regulatory credits and unspecified "energy warranty-related charges."

Another factor was a more than doubling in capital expenditures to $5.8 billion during the three-month stretch compared with the year-ago period. Tesla is embarking on a massive construction spree that Musk characterized on a conference call as probably the United States' "fastest industrial scale up since World War Two."

Tesla is participating with Musk's other ventures, SpaceX and xAI, in Terabab, a $20 billion project in Austin that calls itself "the most epic chip-building effort ever."

Tesla described progress on expansion initiatives as in line with plans, saying it began production of its "Cybercab" vehicle in Texas and that production of the Tesla Semi truck "remains on track" for 2026.

In another closely watched item, Tesla reported gains in subscribers to its "FSD" driver-assistance program, boosting revenues.

Musk faced questions about plans for scaling its robotaxi venture and benchmarks for assessing the company's progress on it, telling analysts he was confident the product will enjoy bountiful consumer demand and that Tesla was working to achieve perfect or near-perfect reliability.

"How many nines of reliability do you need to scale?" Musk said. "Ideally, you want 99.99999, you know, percent reliable."

- Spending spree -

Like other big tech companies such as Google and Amazon, Tesla has faced questions about the payoff from its ambitious and costly technology buildout.

CFRA Research analyst Garrett Nelson described concerns about the spending as a drag on Tesla shares, saying: "They just haven't been very transparent with the Street on the expected return of the dollars that have been spent."

Chief Financial Officer Vaibhav Taneja said Tesla expects that operating expenses driven by research and development will "continue to grow in 2026 and beyond."

Musk said capital efficiency is not the only priority.

"We should be spending on capex as fast as we can spend... without it being too wasteful," Musk said. "It's OK to be a little less capital efficient if we get things done sooner."

The Wednesday report is Tesla's first earnings announcement since Musk successfully launched SpaceX as a publicly traded company in June, temporarily lifting his fortune to over $1 trillion when shares of the rocket and satellite company soared in its initial sessions.

Shares of SpaceX cooled in the ensuing weeks, but the company's valuation at around $1.5 trillion has been viewed as a potential means to transact a combination between SpaceX and Tesla. That topic has generated significant speculation among Wall Street investors.

"It's sort of the elephant in the room surrounding the company," said Nelson.

Musk described "many collaborations" between Tesla and SpaceX.

"There's more and more overlap," said Musk. "Obviously we can't talk about combining companies and that kind of thing on an earnings call. It's got to be done with the appropriate process."

Tesla shares dropped 4.1 percent in after-hours trading.

A.Lavoie--SMC