Electric vehicle giant Tesla revealed Wednesday that second-quarter net income declined year-over-year, driven by a sharp 49% jump in research and development spending that offset revenue gains from stronger-than-expected vehicle sales. The Austin, Texas-based automaker posted $1.11 billion in net profit, or 32 cents per share, for the April-to-June period. Adjusted for one-time items, earnings hit 33 cents per share, falling far short of the 53 cent per share consensus forecast compiled by financial data provider FactSet. Despite the profit miss, total revenue climbed 26% year-over-year to $28.24 billion, outpacing analyst predictions of $26.42 billion.
While Tesla’s core automotive segment delivered a solid performance, the company is diverting billions in capital toward long-term growth initiatives that CEO Elon Musk has framed as the future of the business: building out infrastructure and artificial intelligence software for its upcoming robotaxi fleet and Optimus humanoid robotics program. R&D spending rose to $2.37 billion in the quarter, marking the highest level the company has recorded in at least the past four quarters.
“We’re investing a lot in growing the core business and really preparing for the future,” Musk told analysts during a post-earnings conference call, adding that the current wave of spending will ultimately deliver “incredible returns” down the line.
CFO Vaibhav Taneja confirmed that capital expenditures will continue climbing through the second half of 2025, pushing full-year spending above $25 billion. He projected that capital spending will keep growing for the next two to three years, as the company scales AI computing capacity, expands production capacity for Optimus, and rolls out the network required to support commercial robotaxi operations.
In the hours after the earnings release, Tesla shares dropped 4.1% in after-hours trading. The stock already closed 1.3% lower during regular trading, leaving it down just under 17% for the year to date.
The stronger-than-expected revenue follows Tesla’s better-than-forecast vehicle delivery numbers released earlier this month: the automaker moved 480,216 units in the second quarter, a 25% year-over-year increase that marked the second consecutive quarterly gain. This sales rebound marks a notable turnaround from 2024, when the company faced a consumer boycott in Europe tied to Musk’s public endorsement of far-right political candidates, which dragged down sales. Earlier this year, Tesla lost its long-held title as the world’s top-selling electric vehicle maker to China-based BYD after two straight years of declining annual sales.
Most of Tesla’s Q2 deliveries were its volume Model 3 sedan and Model Y crossover SUV, which saw higher demand after the company cut prices and introduced lower-cost variants last year, paired with reduced leasing and loan costs for European consumers. Overall EV sales in Europe also received a broad boost from rising gasoline and diesel prices spurred by the ongoing Iran conflict, which lifted demand for Tesla’s vehicles alongside other EV brands.
Beyond its core vehicle sales, Tesla also recorded growth in two supplementary business lines. Its energy generation and battery storage division notched $3.14 billion in revenue, a 13% year-over-year gain. Subscriptions for its premium Full Self-Driving (Supervised) driver assistance system also continued growing, with the global subscriber base now reaching nearly 1.5 million, most located in the United States.
Tesla offered a handful of updates on its upcoming products Wednesday: the company has already launched its limited robotaxi trial in seven major U.S. metropolitan areas, and it expects to begin mass production of the Optimus humanoid robot before the end of the year. Production of the Cybercab autonomous vehicle has already started at the company’s Texas factory, while the Tesla Semi electric heavy-duty truck is on track to enter production this year at Tesla’s Nevada facility.
Executives declined to share specific timelines for mass deployment of robotaxis and Cybercabs on public roads, with Musk emphasizing that the company plans to prioritize safety over rapid expansion. “We’re working on what we believe is the most ambitious buildout of advanced infrastructure manufacturing capacity ever in history,” Musk said. “Our goals are very ambitious for robotaxi, but we do need to be cautious about causing any accidents or causing any harm to anyone.”