Tesla's second-quarter profits unexpectedly declined, impacted by discounts offered to boost electric vehicle sales and a decrease in revenue from regulatory credits. Despite a rebound in EV demand in Europe, sales in the US remained subdued due to the removal of incentives, forcing lower prices.

Adjusted net income fell 17% to $1.2bn, significantly below Wall Street's consensus of $1.95bn. The company also reported its first quarterly cash burn in two years, recording $1.1bn in negative free cash flow, despite a record vehicle delivery of 480,126 units. This cash burn occurred as capital expenditures more than doubled.

Revenue increased 26% to $28.2bn, but disappointing margins in the auto business indicated sales were driven by aggressive price cuts. The overall operating margin dropped to 1.4% from 4.1% a year prior. Tesla is accelerating investments in semiconductors, autonomous taxis, and humanoid robots, with capital expenditures rising 142% year-over-year to $5.79bn.