Tesla (TSLA) reported first-quarter earnings after Wednesday's market close that surpassed market expectations. Wall Street is closely monitoring the company's slower-than-expected progress in its autonomous taxi business and the anticipated significant rise in capital expenditures due to investments in artificial intelligence.
According to Bloomberg consensus estimates, Tesla's revenue for the quarter reached $223.9 billion, exceeding expectations of $220.8 billion and representing a 16% year-over-year increase. Adjusted earnings per share were $0.41, higher than the anticipated $0.35. The company's gross margin reached 21.7%, significantly surpassing the expected 17.7%.
During the earnings call, Chief Financial Officer Vaibhav Taneja stated that Tesla's capital expenditures for 2026 are projected to exceed $250 billion, which is expected to result in negative free cash flow for the remainder of the year.
Tesla's stock price initially rose following the earnings release but retreated after the capital expenditure details were announced. In Thursday's premarket trading, the stock was down more than 2%.
In its first-quarter earnings announcement, Tesla stated, "We have begun scaling up new AI computing capacity, advancing construction of new factories for batteries and battery materials, and further preparing production lines for the Megapack 3 energy storage product, the Cybertaxi, and the Tesla Semi truck."
The key to Tesla's growth lies in the deployment of its autonomous taxi business. Last weekend, the company announced it had expanded its autonomous taxi service to parts of Dallas and Houston. Tesla indicated that production for the Cybertaxi, Semi truck, and large-scale energy storage battery projects is progressing as scheduled.
Tesla reported that autonomous taxi miles driven in the first quarter nearly doubled compared to the previous quarter. The company also stated that the Cybertaxi will gradually replace the Model Y SUV currently used in its operating fleet.
Prior to this expansion, Tesla only offered its autonomous taxi service in Austin and a ride-hailing service in the San Francisco Bay Area.
The company also revealed that the service launched in Dallas and Houston operates in a fully driverless mode, with no safety driver in the vehicle. This mode was previously only piloted on a small scale in Austin.
However, Tesla omitted a key piece of information: the company did not disclose the size of the autonomous taxi fleet in each region or the specific number of fully driverless vehicles.
Beyond investments in new batteries, Cybertaxi production, the Optimus humanoid robot, and AI computing, a significant portion of the capital expenditures will be allocated to chip manufacturing projects, which is a core focus for CEO Elon Musk.
Tesla's new Terafab super factory will be located in Austin, Texas.
Last week, Tesla's stock rose driven by positive expectations for its chip business. Earlier on Wednesday, Musk announced that Tesla had completed the final design for its next-generation AI5 chip, which will be used in future electric vehicles, large training clusters, and the Optimus robot.
During the earnings call, Musk said the Tesla Optimus robot is expected to become practical outside of Tesla's factory premises at some point next year. The third-generation Optimus model may be officially unveiled around July or August of this year, ahead of the start of production.
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