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Why Tesla Stock Crashed Today
Key Points
Tesla is burning through cash as it ramps its artificial intelligence (AI) investments.
Investors are frustrated with the company's missed development timelines.
Shares of Tesla (NASDAQ: TSLA) plunged on Thursday after the Elon Musk-led tech titan reported earnings that fell short of investors' expectations.
Image source: The Motley Fool.
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Heavy spending weighed on Tesla's profit margins
Tesla's revenue rose 26% year over year to $28.2 billion in the second quarter. The gains were fueled by a 23% jump in automotive sales to $20.5 billion, a 13% rise in energy generation and storage revenue to $3.1 billion, and a 50% surge in services and other revenue to $4.6 billion.
But sales weren't the issue. Soaring costs and declining margins were.
The electric vehicle (EV) maker's operating margin fell to 1.4% from 4.1% in the prior-year quarter, driven by a 47% surge in operating expenses.
All told, Tesla's adjusted net income declined 17% to $1.2 billion, or $0.33 per share. That was well below Wall Street's estimates, which had called for per-share profits of $0.54, according to Yahoo! Finance.
Worse still, Tesla's free cash flow turned negative as its capital expenditures outpaced its operating cash flow.
Project delays are getting tiresome
Investors would likely have more patience if they were confident that this spending would produce strong returns. But as Musk ramps up Tesla's capital expenditures -- to more than $25 billion in 2026 alone -- he's failing to meet previously communicated timelines for key projects such as the company's Robotaxi service and Optimus robots.
Shareholders are growing increasingly frustrated. And many investors decided to sell their shares today.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.