CEO Elon Musk has pivoted the electric-vehicle maker's focus from manufacturing cars to building so-called physical AI businesses such as self-driving taxis and humanoid robots. Much of Tesla's valuation hangs on that promise.
However, investors are growing increasingly uneasy as spending on AI infrastructure, including data centers, and manufacturing capacity is projected to climb to $25 billion this year, outstripping quarterly cash generated by Tesla's core automotive and energy operations.
"As capex more than doubles and free cash flow turns negative, investors are increasingly focused on evidence that Tesla's spending is strengthening its physical AI moat," Morgan Stanley analysts wrote in a note.
Investors have been betting that Tesla's autonomous-driving technology and robotics ambitions could eventually unlock new, high-margin revenue streams. But progress has been slower than many analysts expected, and Musk has missed some self-imposed deadlines.
Soon after launching its robotaxi service in Austin, Texas, in April last year, Musk predicted Tesla robotaxis would serve half the U.S. population by the end of 2025. In January, Tesla said the service would expand to seven new cities in the first half of 2026. But its robotaxi network remains confined to Austin, Dallas, Houston in Texas, and Miami in Florida.
Ahead of Wednesday's earnings call, the most-voted question on Tesla's investor-relations site, submitted by a retail investor, was: "What is keeping Tesla back from accomplishing these short-term goals that they've set for themselves?"
Nine of the top 10 most-voted questions center around Tesla's AI-driven bets - robotaxis, Optimus humanoid robots and its Full Self-Driving technology.
"Why has growth of robotaxi vehicles stalled? When will we see Cybercab start customer rides?" asked another retail investor.
Tesla has said that it has started manufacturing its Cybercab vehicle, a tailor-made robotaxi without a steering wheel and pedals. However, the vehicles have not been deployed into a robotaxi network, with Musk saying that the production ramp would be "agonizingly slow."
AUTO BUSINESS REBOUNDS
Tesla delivered a record number of vehicles for the April-to-June period, far exceeding market estimates, as higher oil prices helped drive sales of EVs, especially in Europe.
Analysts expect Tesla to deliver 1.7 million vehicles in 2026, up 3.9% from last year, which would snap a two-year skid of declining annual deliveries.
Barclays analysts said investors remained focused on Tesla's AI ambitions, but a stronger automotive business would help generate the cash needed to finance those investments.
For the second quarter, however, the vehicle-sales rebound may not be enough to offset heavy spending. Tesla is expected to report negative free cash flow of $3.3 billion, according to LSEG data.
Analysts expect Tesla's second-quarter profit to come in at 50 cents per share, compared with 40 cents per share in the same period a year earlier.
However, Deutsche Bank analysts expect the elimination of upfront Full Self-Driving software purchases earlier this year and low interest-rate financing in May to hit profitability.
Wall Street expects automotive gross margin excluding regulatory credits of 18.1% in the second quarter, lower than 19.2% in the prior three-month period, according to Visible Alpha data.
