Key Takeaways:
Tesla Inc. reported first-quarter adjusted earnings of 41 cents per share, beating analyst estimates, but said it would increase spending to over $25 billion this year to fund its pivot to artificial intelligence and robotics.
The higher spending plan will result in negative free cash flow for the remainder of the year, Chief Financial Officer Vaibhav Taneja said on the company's earnings call. Shares, which initially rose 4 percent in after-hours trading, reversed gains to trade lower following the announcement.
The electric vehicle maker's Q1 results showed a widening gap between its legacy auto business and its future ambitions. While automotive gross margins improved, the company is pouring billions into new ventures like the Optimus humanoid robot that are not yet generating revenue.
The company’s stock has fallen 14 percent this year as it faces intense competition from rivals like China’s BYD, which briefly overtook Tesla as the world's largest EV maker in late 2025. Tesla delivered 358,023 vehicles in the first quarter, below analyst expectations and highlighting the pressure on its core business.
Revenue for the quarter increased 16 percent from a year earlier to $22.39 billion, supported by higher average selling prices and growth in services. The company reported 1.28 million active subscriptions to its Full Self-Drive software, a 51 percent increase year-over-year. Net income rose to $477 million from $409 million in the same period last year.
To accelerate its strategic shift, Tesla confirmed it has ended production of its higher-priced Model S and Model X vehicles. The factory space in Fremont, California, is being converted to build the Optimus robot, with the company stating that preparations for its "first large-scale Optimus factory will begin shortly in Q2."
Chief Executive Elon Musk also clarified that older Tesla vehicles equipped with its Hardware 3 computer will not be able to use the company's future "unsupervised" self-driving systems. He said Tesla plans to offer a "discounted trade-in" program for customers to upgrade their vehicles.
The aggressive spending increase signals management's commitment to transforming Tesla from an EV maker into an AI and robotics company. Investors will watch for progress on the Optimus factory conversion and updates on the Cybercab and Robotaxi services in the coming quarters.
This article is for informational purposes only and does not constitute investment advice.
