Tesla’s second-quarter revenue rose 26%, while operating margin narrowed to 1.4%.

Tesla reported $28.236 billion of revenue for the quarter ended June 30, 2026, up 26% from $22.496 billion a year earlier. GAAP operating income was $398 million, down 57%, and operating margin fell to 1.4% from 4.1%.

Automotive revenue rose 23% to $20.516 billion, energy generation and storage revenue increased 13% to $3.139 billion, and services and other revenue rose 50% to $4.581 billion. Operating expenses increased 47% to $4.353 billion. Tesla attributed the pressure partly to AI and other research projects, stock-based compensation and the build-out of AI infrastructure.

The quarter is a reminder that revenue growth does not guarantee operating leverage. Gross profit increased 23% to $4.751 billion, but operating expenses rose by roughly $1.4 billion from the year-earlier quarter. Research and development alone was $2.371 billion, up from $1.589 billion. As a result, most of the higher gross profit did not reach operating income.

Cash flow adds another layer. Net cash from operating activities was $4.697 billion, while capital expenditures were $5.789 billion. Tesla’s defined free-cash-flow measure was therefore negative $1.092 billion for the quarter. That measure is non-GAAP, but its arithmetic is stated: operating cash flow less capital expenditure.

GAAP net income attributable to common shareholders was $1.114 billion and diluted EPS was $0.32. The reconciliation shows a $1.005 billion unrealized gain on a SpaceX equity investment in operating cash-flow adjustments and identifies it in the non-GAAP reconciliation. That non-cash item helps explain why net income should not be read as the same object as operating income or operating cash flow.