Musk, meanwhile, reignited speculation of a possible Tesla-SpaceX merger.
Tesla missed analyst expectations by a large margin, reporting about $1.1bn in adjusted revenue last quarter. Wall Street expects the company to raise about $1.9bn.
The loss is despite the company owned by Elon Musk recording a 26pc increase in revenue better than the 28.2bn expected, with car sales alone bringing in more than $20bn – marking 23pc growth year on year.
Electric vehicle (EV) sales jumped 25pc from last year to more than 480,000 units in Q2 2026. The company produced around 451,000 vehicles during that period.
Tesla shares were down about 1.3pc in late-market trading on Wednesday (22 July) following the announcement and were down another 4.2pc in after-hours trading. The company’s shares are down about 8pc since last month and about 17pc over the past six months.
The loss coincides with a sharp decline in the share price of Musk’s other company SpaceX, with which Tesla has close financial ties. SpaceX’s filing earlier this year showed that the company had bought about $700m of Tesla’s battery storage products between 2024 and 2025, as well as more than 130m Cybertrucks by 2025.
While xAI – now owned by SpaceX – bought $292m in Tesla battery solutions in April this year, up from $400m last year. The two companies also collaborate to develop semiconductors as part of Terafab.
Tesla’s sales returned the strongest in Europe, led in part by higher fuel prices, which drove buyers to EVs.
New registrations of Tesla cars rose across the region, according to June figures – doubling in France, marking a 39pc rise in Denmark and a 56pc rise in Sweden.
Meanwhile, the company suffered in its US territory after the government cut federal tax credits for EVs and repealed regulations that encouraged their production.
On the other hand, Chinese rivals such as BYD, Nio and Xiaomi are also entering the Tesla EV market with their affordable, yet high-tech options.
Tesla is trying to diversify its revenue streams from EVs (which make up the bulk of its revenue) to autonomous taxis and AI-powered humanoid robots.
The company also doubled its capital expenditure compared to Q2 last year to fund the project, marking a negative cash flow of $1.1bn due to increased capex of around $3.3bn.
Musk, meanwhile, told investors the company aims to spend more than $25bn a year – nearly three times the $8.5bn it spent last year. Big Tech heavyweights are expected to spend several hundred billion dollars in capex this year alone to build their AI ambitions.
“The company reports that paying customers have traveled 2.5m miles in Tesla’s robotics environment and 380,000 of those miles were unsupervised, with no safety monitor in the car,” said Forrester VP and principal analyst Paul Miller.
“Those unsupervised miles are increasing, but are currently only a fraction of the 220m miles reported by rival Waymo in March.”
Musk, again, reignited speculation about a possible Tesla-SpaceX merger on yesterday’s earnings call.
“As you can see from the many collaborations in many fields with SpaceX, there is more and more overlap,” Musk said.
“We can’t talk about, you know, corporate mergers and that kind of thing on the phone,” he added. “It has to be done through due process.”
A merger could ease the news for struggling Tesla, which has already pivoted closer to SpaceX with its push into AI.
While SpaceX president and chief operating officer Gwynne Shotwell told CNBC in June that the combined entity would “make Elon’s life easier”, it simplified Musk’s trillion-dollar business empire.
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