Tesla, Inc. · Q2 2026 call

We're seeing in locations that have FSD approved, we're seeing a very high take rate of FSD. In fact, I think for a lot of people, they're actually buying Tesla Full Self-Driving with a car attached, as opposed to a car with FSD.

We're investing a lot in growing the core business and really preparing for the future. This is a massive CapEx year. I'm confident that all the things that we're investing in will yield incredible returns. Really, maybe the best CapEx returns that we've ever seen.

We exited Q2 with our largest order backlog since 2023. We are therefore focused on increasing production at all our factories to meet this growing demand. Production growth will be limited by our supply chain. This includes not just batteries, but also electronic components.

In Q2, we had, in North America, about 55% of our deliveries had FSD subscription at the time of delivery enabled. Overall, FSD attach rates continue to improve, reaching nearly 1.5 million paid customers globally, of which 55% is upfront purchases and the remaining 45% is subscriptions.

Automotive margins, excluding regulatory credits, declined sequentially from 19.2% to 16.3%. As a reminder, we had highlighted in Q1 that we had a $230 million benefit from warranty true-downs and some tariff relief, which did not repeat in Q2. Controlling for the impact of those benefits from the prior quarter, our automotive gross margins, excluding credits, would have been approximately flat.

In Q2, we deployed 13.5 GWh of energy storage, a 53% sequential increase, and the second-largest quarter for energy business. Despite this growth, energy gross margins declined from 39.5% to 20.4%. […] Long term, we believe the energy business should normalize at a gross margin rate in the mid to low 20% range.

We continue to grow the Tesla Robotaxi fleet and have expanded to a total of seven markets in the U.S. We expect the ramp of the fleet to accelerate throughout the year, along with expansion into new U.S. m arkets.

Note that we are in a big investment cycle and expect our operating expenses, largely driven by R&D, to continue to grow in 2026 and beyond.

Net income was positively impacted by a mark-to-market gain of $1 billion on our SpaceX holdings, which was offset by losses on FX of approximately $300 million and on Bitcoin of about $100 million.

As previously guided, our free cash flow ended up being negative for the quarter. Most of the reason for it going negative is because CapEx more than doubled sequentially. We expect it to increase further in the second half of 2026. We continue to expect that CapEx for this year will be more than $25 billion. CapEx will grow for the next two or three years

In addition to using our cash for such investments, we are being opportunistic in securing certain debt facilities that will give us the capacity to borrow up to $30 billion to help accelerate such investments. We believe this is the right strategy to position the company for the next era.

I'd actually also like to thank Micron for giving us memory allocation. They've got to make some very tough decisions on memory allocation. We really appreciate Micron making room for Tesla in the years to come and giving us actually a very significant allocation on reasonable terms given the pretty insane pricing of memory these days.

I don't think we're going to have any demand challenges with Robotaxi. The economics will be so compelling that I think we will really have a lot more desire to use the service than I think demand will outstrip our ability to service the demand. […] It's really just about going through what we call the march of nines of reliability, where you need, how many nines of reliability do you need to scale? Ideally, you want 99.999999% reliable. It's just the march of nines of reliability is, I think, the only thing really constraining our growth in Robotaxi.

One of the things for Cybercab that should be noted is because it is a new vehicle chassis, we need to accumulate driving data that is specific to the Cybercab before we can put a lot of them on the road. […] We actually have to accumulate miles with Cybercabs that are retrofitted with steering wheels and acceleration, braking pedals, that kind of thing, to calibrate to the Cybercab chassis.

For Optimus four, which will be built in Austin, that will be a much more vertically integrated supply system for Optimus four. That would aim to have an order of magnitude more production of Optimus four than Optimus three. Sort of aspirationally 10 million units a year versus 1 million units a year of Optimus three. With all the caveats there, which is insanely difficult to scale production.

We have an upgraded AI4 chip that's a moderate improvement over AI4, probably reaches production around the middle of next year. We'll say AI5, which hopefully is in volume production around the middle of next year. AI5 will initially go into Optimus. […] I'm very excited about the design of the Tesla AI6 chip. I think it's going to be the best edge computing chip in the world.

What I've asked the Tesla team to do is really, we should be spending on CapEx as fast as we can without it being too wasteful. We're not trying to aim for some extremely high efficiency capital spend, because that would slow things down. It's a balance between capital efficiency versus time. It's okay to be a little less capital efficient if we get things done sooner, because that's actually going to be the higher NPV outcome for the company.

We're doing an incredible amount of construction and production growth in so many different arenas simultaneously. I don't think there's ever been a company that's done this at the scale, maybe proportionately back when Henry Ford did the Model T or something like that, or World War II, when companies were making attempts to sort of scale up weapons production. I think probably this is the fastest industrial scale-up since World War II in America.

We think power constraints are going to be, they already are a major issue for AI. Just turning on the AI computers, the AI compute demand is so high that even the hyperscalers are having trouble turning on their AI compute and finding the power, and then smoothing the power, especially for the training runs where the power cycles dramatically in a very short period of time. You can have, during a training run, the power consumption can drop by 70% for 100 milliseconds. […] That's why SpaceX has bought so many Megapacks for the data centers.