Tesla’s Record Spending Spree Spooks Investors Despite Q1 Earnings Beat

Tesla delivered a first-quarter earnings surprise that should have pleased Wall Street. Instead, the stock got hammered.

The electric-vehicle maker posted adjusted earnings of $0.41 per share for the three months ended March 2026, topping the consensus estimate of $0.37. Revenue climbed 16% to $22.4 billion, though that fell just short of the $22.6 billion analysts had penciled in. Net income came in at $477 million.

But the numbers that mattered most weren’t in the quarterly report. They came during the earnings call, when management unveiled a spending plan that caught even seasoned Tesla watchers off guard.

A $25 Billion Bet on the Future

CFO Vaibhav Taneja raised the capital expenditure ceiling to more than $25 billion for the full year — a dramatic increase from the $20 billion target set just three months ago and nearly triple the $8.6 billion Tesla spent in 2025. Already in Q1, capex jumped 67% to $2.49 billion.

The money is flowing into six simultaneous production lines spanning vehicles, robots, energy storage, and batteries. Among the projects: the Cybercab manufacturing line, the Semi truck, the Gigafactory in Houston, and a dedicated Optimus factory adjacent to the Austin plant. Tesla is also pouring cash into AI computing capacity — Musk aims to more than double it within six months — and a chip research facility dubbed “Terafab” in Austin, Texas.

The consequence is stark: Tesla now expects negative free cash flow for the remainder of the year. That’s a sharp reversal from Q1, when the company generated $1.4 billion in positive free cash flow. Its liquidity buffer stands at roughly $44.7 billion.

Automotive Margins Shine, But Inventories Balloon

The quarter wasn’t without bright spots. The automotive margin excluding regulatory credits hit 19.2% — the highest in at least a year — buoyed by higher selling prices and lower material costs. Gross margin overall climbed to 21.1%, nearly five percentage points above the year-ago period, though that figure was flattered by one-time effects from tariffs and warranty adjustments.

Should investors sell immediately? Or is it worth buying Tesla?

Yet beneath the surface, warning signs are flashing. Tesla delivered roughly 358,000 vehicles during the quarter, about 7,600 fewer than analysts expected. More troubling: the company built over 50,000 more cars than it sold. Inventory is piling up.

Energy Stumbles, Roadster Delayed Again

The energy storage business — long hailed as a hidden profit engine — hit a speed bump. Segment revenue slid 12% to $2.41 billion, a notable reversal after quarters of strong growth.

Meanwhile, the long-suffering Roadster saga continues. Musk had promised a reveal “by the end of April.” On the earnings call, he pushed that back to “maybe in a month or so” — meaning late May or June at the earliest. It marks at least the eighth delay since the prototype was shown in November 2017. A production-ready vehicle has yet to materialize.

Autonomy and Robotics: Progress With Caveats

On the positive side, Tesla’s unsupervised robotaxi service has expanded to Dallas and Houston, joining Austin and the San Francisco Bay Area. The company now counts 1.28 million FSD subscribers. In Europe, Tesla secured approval for supervised autonomous driving in the Netherlands. Musk targets unsupervised FSD in roughly a dozen US states by year-end, though he doesn’t expect meaningful robotaxi revenue until 2027.

The Optimus humanoid robot is closer to reality. Mass production is slated to begin in July or August at the Fremont plant, which will cease making Model S and Model X to free up capacity. Theoretically, that line could churn out one million robots annually. A second line in Texas targets long-term capacity of ten million units per year.

Market Reaction and Outlook

Tesla shares initially jumped to $406 in after-hours trading before sliding below $375 during the earnings call. In Frankfurt, the stock trades at €320.15, down roughly 14% year-to-date and about 23% below its 52-week high of €416.90. The stock has underperformed every other megacap tech name this year and sits about 7% below its 200-day moving average. The RSI of 44.7 signals neither oversold nor overbought conditions.

Wedbush analyst Dan Ives, a longtime Tesla bull, views the higher investment as a positive signal for the company’s AI ambitions and maintains his outperform rating. More skeptical voices see rising costs, negative cash flow, and a track record of missed timelines. Who’s right may become clearer with Q2 results — and whether Optimus production actually ramps this summer as promised.