Tesla stock fell 18% in the week following its July 22 second-quarter earnings report, its worst one-week showing since 2022. Revenue passed $100 billion on a trailing-12-month basis for the first time, but operating margins narrowed to 1.4% and free cash flow turned negative. Tesla guided to $25 billion in capital spending this year and announced plans to borrow up to $30 billion.
Tesla shares fell by 18% in a single week after the company's July 22 earnings report, the stock's worst one-week performance since 2022. The selling came despite strong revenue growth: Tesla posted more than $100 billion in trailing-12-month sales for the first time.
Record sales, thinner margins
Electric vehicles remain Tesla's primary business, and the company delivered 480,126 of them in the second quarter, up 25% from a year ago. That produced most of its $28.23 billion revenue, with EV sales bringing in $20.51 billion, up 23%.
But margins moved the other way. Operating margins fell from 4.1% a year ago to just 1.4% in the second quarter. Operating expenses jumped 47%, to $4.35 billion. Tesla also reported negative free cash flow of $1.1 billion for the quarter, and its cash and investments dropped by $1.2 billion.
Capex doubles and borrowing plans grow
Capital expenditures more than doubled sequentially, according to CFO Vaibhav Taneja, and the company expects them to keep increasing in the second half of the year. Tesla issued guidance for $25 billion in capex spending for the year and announced plans to borrow up to $30 billion.
Those bets run through artificial intelligence, which is essential to self-driving technology and the Optimus robot line. Tesla is running early versions of its v15 autonomous driving software in robotaxis, but it is unclear when the technology will be ready for nationwide rollout — or if regulators will sign off on it. Meanwhile, the company is discontinuing Model S and X manufacturing lines at its Fremont, California, factory to make room for Optimus robot production.
Musk's net worth slips below $1 trillion
Elon Musk's net worth now stands at $709 billion, according to the Bloomberg Billionaires Index, after SpaceX stock fell below its initial public offering price and Tesla lost value. He acknowledged the loss in a social media post on X, writing: "(Former) Trillionaire."
Investors have long been willing to buy and hold Tesla stock on the strength of Musk's vision. Even after the drop, its high forward price-to-earnings ratio still registers at 170.
Source: The Motley Fool
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