- Tesla (TSLA:US) reported revenue of $22.39 billion in the first quarter of 2026, up 15.8% year-over-year, with Non-GAAP diluted earnings per share of $0.41. Core profitability metrics exceeded Wall Street expectations, with the gross margin restoring to 21.1%.
- Management has significantly raised the capital expenditure guidance for the entire 2026 from $20 billion to over $25 billion. The funds will primarily be directed towards six new factories, Full Self-Driving (FSD) computing infrastructure, and the mass production of the Optimus humanoid robot. This substantial investment has intensified market concerns about negative free cash flow within the year.
- Benefiting from the unexpected positive free cash flow in the first quarter, the stock rose by 4.6% before the earnings call. However, as the guidance for re-evaluated capital expenditures and the lack of substantial short-term revenue contribution from Robotaxi was announced, the stock price retreated to flat territory.
Capital Expenditure Expansion and Free Cash Flow Pressure Reassessment
Tesla's first-quarter financial data showcased the resilience of its core business in the face of macroeconomic headwinds. Although delivery volume was only 358,023 vehicles, and there was pressure from inventory days rising to 68.33 days, the 21.1% gross margin indicated effective cost control and the expansion of high-value-added services. However, the central focus of the financial report quickly shifted to the more than $25 billion in capital expenditure planned for the year. This significant increase reflects the company's pivotal capital spending cycle as it transitions from a traditional automaker to a provider of underlying artificial intelligence infrastructure. With up to $3 billion allocated for the construction of the Texas TeraFab chip factory, along with the procurement of next-generation AI servers, current market models estimate the remaining quarters of 2026 may face continued pressure from negative free cash flow, posing a challenge to conservative institutional investors reliant on immediate profitability dividends.
Core Business Divergence and High-Frequency Growth in the Services Sector
In terms of performance across business lines, traditional automotive revenue reached $16.23 billion, a modest 16% increase year-over-year based on a low 2025 base due to Model Y production line stoppages. Some European and Asia-Pacific markets experienced over 150% quarterly growth in vehicle deliveries, but the macroeconomic environment of high interest rates continued to suppress overall demand. In contrast, revenue from the services and other businesses sector reached $3.75 billion, achieving a better-than-expected 42% year-over-year growth. This sector not only includes supercharging stations and insurance services but also begins to account for preliminary infrastructure investments in Robotaxi. Although revenue from the energy and storage business declined 12% year-over-year to $2.41 billion, with quarterly deployment falling to 8.8GWh, management attributes this to a mismatch in project delivery timing and expects positive annual deployment growth after the new Houston plant goes into production.
Computing Power Reserves Leap and In-House Chip Development Path
On the underlying architecture side, Tesla CEO Elon Musk revealed key advancements in computing power reserves. The AI5 chip has completed its tape-out ahead of schedule and is expected to be prioritized for deployment in data centers and Optimus robots. For edge computing power, the AI4+ chip planned for mid-2027 mass production will double the memory capacity per SoC to 32GB by incorporating Samsung Electronics' (005930:KS) new-generation RAM. The larger-scale vision involves collaborating with Intel (INTC:US) on 14A process technology, with Tesla aiming to establish comprehensive wafer-level R&D capabilities by vertical integration of mask, logic, and packaging stages, thus reducing long-term dependency on a single external foundry.
Autonomous Driving Commercialization Outlook and Regulatory Progress
The FSD business achieved substantial penetration in the first quarter, with global paid users approaching the 1.3 million mark. This growth was primarily driven by the widespread rollout of the subscription model and a decline in churn rates. On the commercial deployment front, Robotaxi has conducted accident-free operational tests in Dallas and Houston, and the accompanying Cybercab has entered initial production. On the regulatory front, the FSD system has gained approval from Dutch regulators and aims to reach consensus with Chinese regulators in the third quarter. If access policies in these regions progress smoothly, Tesla's software business could realize a substantive cash flow period in 2027.
