Though the automaker had slightly better-than-expected revenue, the Q2 earnings showed Tesla's adjusted earnings margin dropped from 18.7-14.4 per cent year-over-year, its free cash flow was short of analyst expectations by more than half a billion dollars, and its earnings per share fell from 91 cents a year ago to 52 today.
Shareholders probably expected better after the company CEO, Elon [look at me] Musk, moved their company from California to Texas, moaning about the state becoming too woke, forgetting that woke EV drivers are Tesla’s target market.
The billionaire Tesla CEO fielded several angry questions from investors and analysts on topics including the company's slipping revenue from auto sales, continued delays to its Robotaxi project, and whether the company's current strategy is to continue with limited-release models rather than invest in large-scale production of a lower-cost model.
"We're going to make great products in the future, just like in the past. End of story," Musk replied bluntly.
Among the most tense exchanges was when an analyst pressed Musk about reports that his artificial intelligence startup xAI had hired engineers away from Tesla and that Musk had diverted GPUs destined for Tesla over to xAI.
An analyst asked, "How do you make allocation decisions among these various ventures, and how do you make Tesla owners comfortable that you're doing it in a way that really benefits them?"
Musk seemed to bristle before responding that news of the GPU diversion was an "old article" and that Tesla had rerouted the systems because it had no place to store them—but his fledgling company xAI did.
"I want to be clear that was in Tesla's interest, not contrary to Tesla's interest," Musk said.
Rather than reassuring investors that the company is in a solid position to rebound, Musk's comments appear to have done the opposite during the call. By the time he signed off, Tesla shares plummeted more than seven per cent in after-hours trading.
In Q2 earnings, Tesla reported a seven per cent decrease in year-over-year automotive revenue, contributing to the company's diminished profits.
Not to mention increasing global competition — such as China's rapid expansion in the sector — which Musk acknowledged on the call is of notable concern for the company.
"There are quite a few competing electric vehicles that have entered the market," Musk said. "Mostly, they have not done well, but they have discounted their EVs very substantially, which has made it a bit more difficult for Tesla."
The complications are compounded by the company's heavy investment in artificial intelligence, which CNBC reported has increased expenditures by 10 per cent from a year ago to $2.27 billion, further shrinking the company's margins.
Tesla's Q2 numbers are the second quarter in which the company's profit has sunk, with the worst margins Tesla has seen in five years. The disappointing results come shortly after shareholders re-approved Musk's massive 10-year $46.8 billion pay package.
Dan Coatsworth, investment analyst at AJ Bell, told Reuters: "There is a lot of talk about robotaxis, humanoid robots, and autonomous driving, which provides an exciting narrative for investors but doesn't get over the fact that these are tomorrow's potential riches, not today's.”
