Earnings at Musk's car company fall as research spending cuts into profit from selling cars

Tesla said Wednesday that its profits fell last quarter as the car company run by Elon Musk shoveled more money into research and development, cutting into profits from a sharp increase in vehicle sales.

The Austin, Texas, company reported second-quarter net income of $1.11 billion, or 32 cents per share. That is compared to earnings of $1.17 billion, or 33 cents per share, in the same quarter last year.

Excluding certain charges, earnings were 33 cents per share, down from 40 cents per share in the prior-year quarter. That fell short of the 53 cents per share forecast by Wall Street analysts, according to FactSet.

Revenue rose 26% to $28.24 billion, beating analysts’ forecast of $26.42 billion.

Spending on research and development surged about 49% from a year earlier to $2.37 billion — higher than its been going back at least four quarters.

Tesla shares fell 2.7% to $363.98 in after-hours trading shortly after it released its latest results. The stock ended the regular trading session 1.3% lower and is down just under 17% this year.

Earlier this month, Tesla reported that it delivered 480,216 cars in the second quarter, a 25% increase from the same period last year and its second straight quarterly gain. The sales also exceeded analysts’ expectations, according to a FactSet survey.

Tesla’s improving sales this year mark a big turnaround from a year ago, when many Europeans refused to buy the company’s cars because of Musk’s embrace of far-right political candidates in elections there.

The vast majority of the company’s vehicle deliveries last quarter were comprised of its Model Y crossover SUV and Model 3 sedan. Tesla rolled out less expensive versions of both models last year in hopes of boosting sales. It also cut the cost of leasing and loans in Europe.

Sales were also helped by a surge of EV buying in general in Europe as gas and diesel prices have risen due to the Iran war.

Just a few months ago, Tesla reported sales had fallen in 2025 for a second year in a row and it had to yield its crown as the world’s largest EV maker to China’s BYD.

Tesla's EV sales accounted for most of the company’s overall revenue, but the company got a boost from its energy generation and battery storage business, which posted revenue of $3.14 billion, a 13% gain compared to the second quarter last year.

The company also benefited from increased subscriptions for its driver assistance feature, available in the U.S., called Full Self-Driving (Supervised).