Tesla earnings rise, but AI expenses add up for Elon Musk

Posted 5 hours ago by

Axios

Tesla reported an uptick in quarterly revenue and profit, but the costs of pivoting to an AI future are starting to add up.Why it matters: CEO Elon Musk has directed the company to invest heavily in the development and production of humanoid robots, self-driving cars and AI chips.Driving the news: The company reported Q1 revenue of 22.4 billion, up 16 from a year earlier.Net income totaled 477 million, up 17, but operating expenses ballooned 37, to 3.78 billion.Its operating margin fell to 4.2, declining sequentially for the second consecutive quarter.Musk acknowledged on an earnings call that the company is planning on a very significant increase in capital expenditures, but he said it will be well justified for a substantially increased future revenue stream.State of play: The company recently discontinued the Model S sedan and Model X crossover to make way for the production of the Optimus robot at its factory in Fremont, Calif.The Model Y crossover — its most popular vehicle — could be similarly sidelined: Once in production, we expect that Cybercab will begin to replace the existing Model Y fleet and will be the largest volume vehicle in the fleet over time, Tesla said in its earnings presentation.Optimus pilot production is in the works for 2026, and Musk said the product will probably be useful outside of Tesla sometime next year.Zoom in: Tesla's first-quarter EV deliveries — a close proxy for sales — totaled 358,023.That was up 6 from the same period a year earlier, when the company was dealing with a sales backlash from Musk's leadership of President Trump's Department of Government Efficiency.But the quarter's performance marked an underwhelming start to the year, missing consensus estimates of 370,000, Wedbush Securities analyst and Tesla bull Dan Ives wrote in a research note.What's next: Tesla said it expects to reach volume production of the Cybercab and electric Semi in 2026.And the company is partnering with Musk's SpaceX, which is approaching an IPO, to build what Tesla called the largest chip fab ever.We anticipate greater chip demand than what existing and planned industry capacity can accommodate, Tesla said in its earnings presentation.Editor's note: This story has been updated to include comments from Tesla's earnings call.