Electric vehicle (EV) maker Tesla reported total revenue of $28.24 billion in the second quarter (Q2) of 2026, a 26% year-over-year (YoY) increase from $22.5 billion, driven by vehicle deliveries, higher automotive sales, and continued growth in its services business.

The company’s revenue exceeded analysts’ expectations by approximately $1.8 billion.

However, its diluted earnings per share of $0.33 missed estimates by $0.21.

Net income declined 17% YoY to $1.15 billion from $1.39 billion.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 4% YoY to $3.27 billion from $3.40 billion. The adjusted EBITDA margin contracted to 11.6% from 15.1%.

Tesla’s net income included a $1 billion mark-to-market gain on its SpaceX holdings. This was partly offset by about $300 million in foreign exchange losses and a $100 million Bitcoin-related loss.

Automotive revenue increased 23% YoY to $20.52 billion from $16.66 billion. Total vehicle deliveries rose 25% to a second-quarter record 480,126 units from 384,122 units in the corresponding quarter last year.

Model 3 and Model Y deliveries totaled 467,762 units, while other models accounted for 12,364 units. Tesla produced 451,758 vehicles during the quarter.

During the earnings call, Chief Financial Officer Vaibhav Taneja said vehicle deliveries increased sequentially by 60% in the Americas, 27% in the Asia Pacific, and 12% in Europe, the Middle East, and Africa. The company ended the quarter with its largest vehicle order backlog since 2023.

Tesla said production growth could be constrained by the availability of batteries and electronic components. The company is negotiating strategic supply agreements to address these constraints.

Automotive leasing revenue declined 16% YoY to $364 million from $435 million, while revenue from regulatory credits declined to $146 million from $439 million.

Automotive gross margin excluding regulatory credits declined sequentially to 16.3% from 19.2%. The previous quarter included approximately $230 million in benefits from warranty adjustments and tariff relief that did not recur in Q2. Excluding these benefits, the company said automotive margins were approximately flat sequentially.

Higher commodity prices and interest rates also affected automotive profitability. Tesla records interest rate subsidies offered to vehicle buyers as reductions in revenue, and the cost of these incentives increased as interest rates rose.

Revenue from Tesla’s energy generation and storage business increased 13% YoY to $3.14 billion from $2.78 billion.

The company deployed 13.5 GWh of energy storage during the quarter, a 53% sequential increase and its second-largest quarterly deployment.

Energy gross margin declined sequentially to 20.4% from 39.5%. Tesla attributed the decrease partly to a warranty adjustment of approximately $240 million related to vendor cell issues affecting legacy deployments.

The margin decline also reflected the absence of more than $200 million in tariff benefits recognized during Q1 and lower average selling prices for industrial storage systems amid increased competition.

Tesla expects the energy business to generate a normalized long-term gross margin in the mid- to low-20% range. The company said its energy storage backlog remained robust, supported by demand from data centers, renewable energy integration, and broader electrification.

Growing Demand for Megapacks

Chief Executive Officer Elon Musk said battery storage could help balance electricity grids and manage the variable output of solar and wind projects. He also identified artificial intelligence data centers as a growing demand source for Megapack systems.

According to Musk, electricity consumption during artificial intelligence training can fall by as much as 70% for approximately 100 milliseconds, requiring fast-response power electronics and storage systems to stabilize power supply. He said SpaceX had purchased Megapacks primarily to manage such fluctuations at its data centers.

Tesla plans to begin production of Megapack 3 and has started production at its lithium refining and cathode facilities. It is also scaling battery cell manufacturing and preparing to establish large-scale solar cell and module production covering silicon refining, cell manufacturing, module production, and project deployment.

Revenue from services and other activities increased 50% YoY to $4.58 billion from $3.05 billion. The segment’s gross margin improved sequentially to a record 14.1% from 9.2%, supported by higher volumes and improved cost management across used vehicles, Supercharging, service centers, and insurance.

Tesla said approximately 55% of its North American vehicle deliveries during the quarter included a Full Self-Driving subscription at delivery. The company had nearly 1.5 million paid Full Self-Driving customers globally, comprising 55% upfront purchasers and 45% subscribers.

Operating expenses increased 47% YoY to $4.35 billion, reflecting higher research and development spending, preproduction costs for the Semi, Optimus, and Cybercab, artificial intelligence projects, additional computing capacity, and litigation expenses.

The company expects its capital expenditure to exceed $25 billion in 2026 and increase further during the second half of the year. Tesla anticipates capital spending will continue to grow over the next two to three years as it expands its robotaxi fleet, Optimus production, semiconductor fabrication, solar manufacturing, artificial intelligence computing infrastructure, and automotive manufacturing capacity.

Tesla is also arranging debt facilities that could provide borrowing capacity of up to $30 billion to support these investments.

Tesla reported total revenue of $22.39 billion in Q1 2026, a 16% YoY increase from $19.34 billion, driven by higher vehicle deliveries, improved average selling prices, and strong growth in services and other revenue.