Tesla Q2 2026: Record Revenue of $28.2 Billion but Operating Profit Falls 57% to $398 Million
Tesla reported record Q2 2026 revenue of $28.24 billion — up 26% year-on-year — but operating income fell 57% to $398 million as the automotive gross margin slipped to 16.3%, regulatory credit revenue dropped 67% year-on-year to $146 million, and free cash flow turned negative at −$1.09 billion.
Tesla reported Q2 2026 financial results on 22 July 2026, posting record quarterly revenue of $28.24 billion — a 26% year-on-year increase and the first time the company's trailing twelve-month revenue has exceeded $100 billion. The result was ahead of Wall Street consensus, which had expected approximately $26.4 billion. Automotive revenue contributed $20.5 billion, rising 23% year-on-year.
Despite the strong top-line result, profitability deteriorated sharply. Operating income fell 57% year-on-year to $398 million, and the operating margin sank to 1.4% from 4.1% a year earlier. Automotive gross margin declined to 16.3%. Non-GAAP earnings per share of $0.33 missed the analyst consensus of approximately $0.53. Free cash flow turned negative at −$1.09 billion, compared with a positive $1.44 billion in Q1 2026.
Two factors drove the profit compression. Regulatory credit revenue collapsed to $146 million, down 67% year-on-year from $439 million in Q2 2025, as other automakers' compliance positions improved. Research and development expenditure rose 49% to $2.37 billion as Tesla accelerated investment in artificial intelligence, its autonomous robotaxi network and the Optimus humanoid robot. Tesla's stock fell approximately 12% in the session following the results announcement.