Tesla posted its second-quarter financial results this afternoon, revealing strong revenue growth but deteriorating profitability. Total revenues climbed 26 percent year over year to $28.2 billion, with automotive revenue rising 23 percent to $20.5 billion. The energy and storage segment grew 13 percent to $3.1 billion, while services revenue doubled to $4.6 billion, largely driven by the shift from one-time purchases to monthly subscriptions for the Full Self-Driving (FSD) driver-assist system—a move tied to CEO Elon Musk's compensation package.

Despite top-line growth, operating expenses surged 47 percent to $4.4 billion, causing operating income to plunge 57 percent to $398 million. The automaker's once-enviable double-digit profit margin collapsed to just 1.4 percent. Regulatory credits, which previously bolstered earnings during challenging quarters, contributed only $146 million after being eliminated in the United States in 2025 with Musk's blessing.

Net income reached $1.1 billion for the quarter, down 5 percent from the same period last year. While Tesla remains profitable, the results underscore a widening gap between revenue growth and cost escalation as the company ramps spending on AI infrastructure, robotics, and new vehicle programs.