Tesla’s revenues are bouncing back after a dismal two years

Tesla is in negative free cash flow territory, as it increases its expenditures on major projects like AI infrastructure and robotics.

After a dismal two years of weakening demand, falling sales, and damage to its brand by Elon Musk’s political activities, Tesla’s road to recovery continues apace. On the heels of an impressive delivery report , the company released its earnings for the second quarter of 2026 — giving us the latest glimpse at the EV company that Musk has said he wants to transform into a leader of AI and robotics.

Despite that mission, Tesla remains a car company. And in the second quarter, it sold an impressive 480,126 vehicles, about a 25 percent increase compared to the second quarter of 2025. (For a direct-to-consumer company like Tesla, deliveries are a proxy for sales.)

Tesla certainly did a good job shrinking its inventory, which is good for the balance sheet. But what about those numbers?

Tesla said it earned $1.11 billion in net income on $28.2 billion in revenue in the quarter that ended June 30th. That’s a 26 percent increase in revenue but a 5 percent increase in profits over the second quarter of 2025 , when the company earned $1.17 billion in net income on $22.5 billion in revenue. Tesla exceeded revenue expectations from Wall Street, which assumed approximately $26.4 billion in revenue.

But there were still signs of trouble. The company reported negative free cash flow of $1.1 billion, a sign that Tesla’s operating revenues are insufficient to cover its capital expenditures. Basically, Tesla is spending more — on AI infrastructure, robotics, and manufacturing — than its earning on car sales and energy installations. Last year, some analysts predicted that negative free cash flow could trigger a steep drop in share price. (Tesla’s share price is down 14 percent so far this year.) The company said it had $43.5 billion in cash on hand, but its capital expenditures were up year over year 142 percent to $5.7 billion this quarter.

In a shareholder deck, Tesla said it “generated over $100B in revenue on a trailing twelve-month basis for the first time.” It also touted Cybercab production at its Gigafactory in Texas, and said Tesla Semi production “remains on track” at its Nevada facility later this year. And it said it began construction for its Optimus humanoid robot production at the factory in Fremont after decommissioning the assembly line for the Model S and X .