Tesla shares fell more than 15% on July 23 after the company missed adjusted EPS estimates, leaving the stock down more than 30% year to date. A 67% collapse in high-margin regulatory credit revenue, a $25 billion capital spending plan, and toned-down robotaxi expectations drove the reaction.
Tesla stock fell more than 15% on July 23 in the aftermath of its second-quarter earnings report, and the stock is now down more than 30% year to date.
Shares of the electric vehicle maker fell after Tesla badly missed adjusted EPS estimates, talked of increasing capital expenditures, and dramatically changed its tone about its robotaxi rollout.
A $25 billion capex plan and toned-down robotaxi expectations
Tesla said it is in the midst of a massive investment cycle. It plans to spend $25 billion in capex this year, with that figure growing over the next two to three years as the company raises Optimus robot production capacity, expands its robotaxi fleet, builds out AI computing infrastructure, and invests in its TeraFab project.
At the same time, the company toned down robotaxi expectations. A year ago Elon Musk predicted robotaxis would be accessible to half the U.S. population by the end of 2025; they weren’t, and supervised and unsupervised rides remain available in only two states. According to Tech Crunch, robotaxi miles carrying paying customers also fell 36% sequentially in Q2.
For Optimus, Musk again said he thought the robot would become Tesla’s biggest product ever. However, he admitted major technical hurdles still to overcome, including with the “electromechanical design of the robot to achieve sufficient dexterity”.
Deliveries climbed 25% while regulatory credits plunged
As for the actual results, Tesla’s automobile deliveries in Q2 climbed 25%, up from the 6% increase in Q1 and a reversal from the declines it saw throughout much of 2025, while total production increased 10%.
That helped auto revenue rise 23% to $20.5 billion, aided by a 54% jump in active full-self-driving subscriptions to 1.48 million users. Overall revenue climbed 26% year over year to $28.2 billion, with energy generation and storage revenue up 13% to $3.1 billion and service revenue up 50% to nearly $4.6 billion.
Yet the company’s high gross margin regulatory credit revenue plunged by 67% to $146 million. That decline, along with a 47% jump in operating expenses, is a big reason adjusted EPS sank 18% to $0.33, well short of the $0.51 analyst consensus compiled by LSEG. Operating cash flow climbed 85% to $4.7 billion, but $5.8 billion of capex left free cash flow at negative $1.1 billion.
A lost profit driver and a 170x forward P/E
Motley Fool analyst Geoffrey Seiler traced the credit collapse to the removal of civil penalties for autos not meeting Corporate Average Fuel Economy standards and the loosening of emission restrictions in Europe. That revenue had been a major source of profits for the company, and its decline pressures the core EV business while the robotaxi and robotics units remain unproven.
Seiler put Tesla’s valuation at 170x forward P/E, a stock valuation he described as based solely on speculative bets. He added that the potential of Tesla eventually being acquired by Musk’s SpaceX could help provide a floor for the stock, provided SpaceX can stop its own free fall.
Source: The Motley Fool
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