Full Transcript: Tesla Q2 2026 Earnings Call

Tesla (NASDAQ: TSLA ) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

The full earnings call is available at Summary Tesla, Inc. achieved record Q2 deliveries with significant growth in Model Y sales, contributing to increased demand for their vehicles globally. The company's energy business is expanding rapidly, with efforts to scale AI data centers and solar panel production, alongside starting production of the Cybercab, Tesla Semi, and Megapack 3. Tesla is heavily investing in capex, expecting more than $25 billion this year, to enhance production capabilities for Optimus, Robotaxi, and semiconductor fabs.

S. despite some regulatory challenges. Automotive gross margins decreased due to commodity price hikes and interest rates, while energy and service margins showed mixed results. Management emphasizes the strategic importance of Full Self-Driving (FSD) as a demand driver, with 55% of North American deliveries in Q2 featuring FSD subscriptions.

Tesla plans to vertically integrate its Robotaxi fleet and Optimus production, with major investments from partners like Samsung and TSMC to support these initiatives. The company anticipates strong future demand for its energy storage solutions, particularly for grid balancing and AI data centers, despite some supply constraints. Full Transcript Travis Axelrod, Head of Investor Relations Good afternoon everyone and welcome to Tesla's second quarter 2026 Q&A webcast. My name is Travis Axelrod, head of Investor Relations, and I'm joined today by Elon Musk, Vibhav Taneja, and a number of other executives.

Our Q2 results were announced at about 3 pm Central Time in the update deck we published at the same link as this webcast. During this call we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC.

During the question and answer portion of today's call, please limit yourself to one question and one follow-up. Please use the raise hand button to join the question queue. Before we jump into Q&A, Elon has some opening remarks. Elon Musk, CEO So yeah, it's been a great quarter.

We achieved record Q2 deliveries. Model Y I believe is now, I think it's the best-selling car of any kind in the world and is setting records across the board. So its popularity is increasing tremendously and we're seeing in locations that have FSD approved we're seeing a very high take rate of FSD and in fact I think for a lot of people they're actually buying Full Self-Driving with a car attached as opposed to a car with FSD. S.

and saying they want the Full Self-Driving with whatever car it comes with, essentially. So clearly this is a significant demand driver. As we get approval for FSD in different countries, I think we'll see a similar uptick in demand. So yeah, it's looking very good on that front.

The energy business is also growing incredibly fast and I think will be crucial for the scale-up of artificial intelligence data centers. We're investing a lot in growing the core business and really preparing for the future. So this is a massive capex year, but I'm confident that all the things that we're investing in will yield incredible returns — really the best capex returns that we've ever seen. And, you know, the Tesla team has performed incredibly well.

The Cybercab has started production and we will soon start production with Optimus. We have started production with the Tesla Semi truck. We will soon start production with Megapack 3. We've started production with the lithium refinery, the cathode refinery.

We're scaling up battery cell production, and we're also preparing to do a massive solar panel — like solar cells and panel — production. Actually this is going all the way from silicon refinement to producing the solar cell and then deployment of solar, because there's going to be tremendous need for electricity in the future due to electrification of transportation and AI, obviously. So we're working on what we believe is the most ambitious build-out of advanced infrastructure manufacturing capacity ever in history. It's a big deal.

So with Robotaxi, our goals are very ambitious for Robotaxi, but we do need to be cautious about causing any accidents or causing any harm to anyone. Although there are, I think, 30 to 40,000 automotive deaths per year in the United States alone, most of those do not generate any press. You never really read about almost any of those. But if we injure even one person, it will be worldwide headline news and regulators will immediately clamp down on our activities.

And we don't want to injure anyone. So we're going as fast as humanly possible in scaling Robotaxi, while trying to ensure that we do not harm anyone at all and ideally do not even run over a pet. That's really the constraint: we want to grow as fast as possible with Robotaxi without harm to anyone. And we're providing live updates for Robotaxi launch.

As we open up in a city, we immediately post that on X. So if you just follow the Tesla account on X, you'll— we'll keep you informed as we scale to new cities. We've opened up in a number of cities in Florida and in Texas and obviously in the Bay Area. We'll continue to scale, I think, very, very rapidly.

It looks like more than 10% a week in terms of miles driven. So that's a very high compound growth rate. Let's see — Optimus. As you've heard me say before, I think Optimus will be the biggest product ever.

But it is a very complex problem to solve. It's one of the hardest things to solve: to make an autonomous humanoid robot that can do tasks that, if you simply ask it to do something or show it a video, it can do the task without any programming. No one's ever achieved this. There are many challenges in the electromechanical design of the robot to achieve sufficient dexterity and also be very reliable and have long wear and tear — meaning it needs to be out in the field and not break down, otherwise you've got sort of a 70-kilogram robot that just flopped over and you've got to carry it out like a body.

You know, it doesn't have wheels and we don't want Optimus to go haywire. So it's a lot of work to get the design right and to scale production. And I really want to emphasize here that the production scaling challenge is very, very substantial. This is going to be the hardest product to scale manufacturing that we've ever made at Tesla because everything on the robot is new, and the difficulty of scaling the production ramp is proportionate to the newness of the parts in the robot.

At least with electric cars, the non-electric powertrain portions of the cars had an existing supply chain, so you could go to existing suppliers for wheels and side mirrors and windshield glass and that kind of thing, body panels. But with Optimus there is no supply chain. So we've had to build up a supply chain in its entirety or in-house. We actually in-housed a tremendous amount.

The Optimus production line that we're building out in Fremont in place of what used to be the Model S/X production — it looks incredible. I mean it's quite stunning to see. So I just want to make sure to calibrate people correctly: Optimus will follow the sort of normal S-curve of a manufacturing ramp, but the initial portion of the S-curve will be quite flat and long because of the newness of the parts in the robot. You've probably seen lots of impressive demonstrations of robots on the internet, but those demonstrations you're seeing are pre-programmed or remote controlled.

There is no humanoid robot that is actually able to do generalized tasks. Optimus will be the first one that is capable of doing that, where it's not just a demo — it's genuinely useful in day-to-day life. Optimus is designed to have full human dexterity — a hand that has the same level of dexterity, if not higher, than a human hand. And the human hand is an incredible, incredible thing.

The more you study the human hand, the more you realize how amazing hands are. It's more than just opposable thumbs. I mean the nuances of how human hands work are amazing — the closer you look the more amazed you are. And Optimus will have human and then superhuman dexterity.

So it's really going to be quite something. Let's see — TeraFab. We expect to announce the location soon and provide more details about our plans in that regard. We'll leave that to the product launch announcement rather than try to squeeze it into an earnings call, because I think this is a very big announcement and it deserves to have its own sort of stay in the spotlight and not be squeezed into an earnings call.

But I do think TeraFab is going to be an amazing initiative and a necessary one, and one without which we'll be constrained in our ability to scale Optimus production because we simply won't have enough AI chips. So it's crucial to solve that, and we'll have to solve memory, logic, and packaging in order to scale Optimus. We've placed equipment orders for our development fab in Austin, and that development fab I think is pretty cool because it's intended to have lithography, mask production, and then logic, memory, and packaging and chip testing all under one roof. So you can have a very fast iterative cycle and try out new chip designs very quickly and see if they work.

I don't think such a building exists anywhere on Earth. So this is really going to be super helpful as we try some exciting, adventurous, high-risk, high-payoff bets on AI chips focused, like I said, primarily on Optimus. How do we make Optimus as useful as possible? Then we have Digital Optimus, which is basically driving a computer screen — I guess you could call it computer use or something like that — but driving a computer screen in the same way that you drive a car.

For the car it's sort of photons in and controls out. The same thing is true for Optimus and Digital Optimus: it's photons in, controls out. So we feel confident we can adapt the same Tesla AI technology that we developed for self-driving cars to have a self-driving computer screen or self-driving computer essentially. The self-driving computer — the very low-cost Tesla AI4 computer — can handle all of the short-term tasks, doing real-time video control of the screen of the computer.

So it's not like screenshots type of thing — it's real-time video and high frame rate. And Digital Optimus will be important, obviously, for physical Optimus, because physical Optimus needs to be able to operate computers. It can't come up to a touchscreen and not know what to do. It's got to have a generalized touchscreen and computer use capability.

So that's looking promising. And this is in partnership with xAI's Grok. So the big model that is kind of like the manager of Digital Optimus tells Digital Optimus what to do, provides it with a series of tasks, and then Digital Optimus goes and does those tasks. We're also building out a Megapod design that has Tesla AI4 computers with x86 — pairing an x86 computer with the Tesla AI4 computer in a box.

It's got this Digital Optimus in a box and in a Megapod, kind of like the Megapack packaging. And so we put just a large number of AI4/x86 combos in a giant box, essentially, and these boxes can be placed anywhere in the country or outside the country. This allows us to scale AI compute using disaggregated electricity production. There are lots of places all around the world, including in our Superchargers — I think we've got something like 7 gigawatts of power at our Superchargers and growing — and we can place Megapods at many of these Superchargers and have distributed power for AI.

So I think that could be quite a big deal. So in conclusion, we're super excited about our autonomy and robotics roadmap. There's so much awesome stuff coming. It's, like I said, hard to squeeze into — I think it's cool — but we'll have a lot of product announcements and this is going to be a great year for Tesla.

I think one of our best years ever. And then I think next year will be even better. So in conclusion, I want to thank the Tesla team for their excellent execution and all of our supporters for joining us in this journey. Thank you.

Travis Axelrod, Head of Investor Relations Great. Thanks so much, Elon. And now Vibhav has some opening remarks. Vaibhav Taneja, CAO & CFO Thanks, Travis.

So Q2 continued the trend that we saw at the end of Q1, a resurgence in demand for vehicles across the globe. We achieved record Q2 deliveries globally with sequential growth across the Americas, APAC and EMEA of 60%, 27% and 12%, respectively. Additionally, Model Y set records in several key markets, including the Netherlands, Australia and New Zealand. The efforts of the Tesla team to create compelling products at a reasonable price with the capability of autonomous driving are coming to fruition.

We exited Q2 with our largest order backlog since 2023. We are therefore focused on increasing production at all our factories to meet this growing demand. Production growth will be limited by our supply chain. This includes not just batteries but also electronic components.

We've been here before and like always, our Tesla team is working actively to unblock the obstacles ahead by securing strategic deals with suppliers. Like Elon mentioned, one of the key factors for vehicle demand has been FSD. Our sales data suggests one of the main reasons customers are coming and looking at the car is because of FSD. In Q2 in North America, about 55% of our deliveries had FSD subscription enabled at the time of delivery.

5 million paid customers globally, of which 55% is upfront purchases and the remaining 45% is subscriptions. We expect that the bulk of the growth in FSD monetization will come from subscriptions as we've removed the purchase option in most markets. 3%. As a reminder, we had highlighted in Q1 that we had a $230 million benefit from warranty true-downs and some tariff relief which did not repeat in Q2.

Controlling for the impact of those benefits from the prior quarter, our automotive gross margins excluding credits would have been approximately flat. This demonstrated the effective pricing and cost management done by the Tesla team as we continue to drive demand. Commodity price increases and interest rate changes all continue to add to our cost. Note that interest rate subvention costs are recognized upfront as a revenue offset.

So as interest rates have risen this year, the cost of subvention has risen along with them, which had a negative impact on automotive margins. As we have previously noted, the energy business is inherently lumpy. Deployments are tied to customer timelines and largely out of our control. 5 GWh of energy storage, a 53% sequential increase and the second largest quarter for the energy business.

4%. This margin decline was a result of several dynamics. First, there was a warranty true-up in the quarter of about $240 million related to certain vendor cell issues for our legacy deployments. Also, the tariff benefits we recognized in Q1 of more than $200 million did not repeat.

And lastly, we had previously guided that ASPs for industrial storage are coming down amidst good, growing competition. Long term, we believe the energy business should normalize at a gross margin rate in the mid to low 20% range. Our order backlog of this business is robust and we are doing our best to build based on both existing demand and future demand we expect from data center growth and overall electrification of the economy. 1%, an all-time high.

This was mainly driven by an uptick in volume and better cost management of our vehicle fleet that supports businesses such as used car, supercharging, service centers and insurance. While marginal today, also included in this business are deliberate investments we are making in infrastructure that will help scale Robotaxi in the future. S. S.

markets as previously guided. Operating expenses increased sequentially. The increase came primarily from significant research and development related activities including pre-production ramp costs for new products like the Semi truck, Optimus, Cybercab and other AI initiatives, as well as the depreciation for additional compute that we brought online. Additionally, we had charges related to litigation expenses in the quarter.

Note that we are in a big investment cycle and expect our operating expenses, largely driven by R&D, to continue to grow in 2026 and beyond. Net income was positively impacted by a mark-to-market gain of $1 billion on our SpaceX holdings which was offset by losses on FX of approximately $300 million and on Bitcoin of about $100 million. As previously guided, our free cash flow ended up being negative for the quarter. Most of the reason for it going negative is because CAPEX more than doubled sequentially and we expect it to increase further in the second half of 2026.

We continue to expect that CAPEX for this year will be more than $25 billion.