Tesla cash burn to test investor faith in AI bets
* Heavy spending targets AI infrastructure, robotaxi and Optimus
* Stronger vehicle operations could help finance AI-related spending, Barclays says
* Quarterly update may show first cash burn in more than two years
By Akash Sriram and Abhirup Roy
July 21 (Reuters) – Tesla is expected to report its first quarterly cash burn in more than two years on Wednesday as its spending on artificial intelligence and robotics increases, intensifying investor scrutiny over when those bets will pay off.
CEO Elon Musk has shifted the electric vehicle maker’s focus from building cars to building so-called physical AI businesses such as driverless taxis and humanoid robots. Much of Tesla’s valuation is based on this promise.
However, investors are growing increasingly uneasy as spending on AI infrastructure, including data centers, and manufacturing capacity is forecast to rise to $25 billion this year, outpacing quarterly cash from 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 believe Tesla’s autonomous driving technology and robotics ambitions could eventually pave the way for new, high-margin revenue streams. But progress has been slower than many analysts expected, and Musk has missed some self-imposed deadlines.
Shortly after launching his robotaxi service in Austin, Texas, in April last year, Musk predicted that Tesla robotaxis would serve half the US 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 the robotaxi network remains limited to Austin, Dallas, Houston in Texas and Miami in Florida.
The top-voted question posted by a retail investor on Tesla’s investor relations site ahead of Wednesday’s earnings release was: “What’s keeping Tesla from achieving these short-term goals they’ve set for themselves?”
Nine of the 10 top-voted questions revolve around Tesla’s AI-focused bets (robotaxis, Optimus humanoid robots, and Full Self-Driving technology).
“Why has the growth of robotaxi vehicles stopped? When will we see Cybercab start customer trips?” asked another retail investor.
Tesla said it has started producing the Cybercab vehicle, a custom-made robotaxi without a steering wheel or pedals. But the vehicles have not been deployed on a robotaxi network, and Musk said the production ramp-up would be “painfully slow.”
Tesla delivered a record number of vehicles in the April-June period, far exceeding market forecasts, as higher oil prices helped boost electric vehicle sales, especially in Europe.
Analysts expect Tesla to deliver 1.7 million vehicles in 2026, up 3.9% from last year, which would break a two-year downward trend in annual deliveries.
Investors remain focused on Tesla’s AI ambitions, but a stronger automotive business will help generate the cash needed to fund those investments, Barclays analysts said.
However, the recovery in vehicle sales in the second quarter 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 earnings to be 50 cents per share, compared to 40 cents per share in the same period a year ago.
But Deutsche Bank analysts expect the elimination of upfront Full Autonomous Software purchases earlier this year and low-interest-rate financing in May to impact profitability.
Wall Street expects automotive gross margin, excluding regulatory credits, to be 18.1% in the second quarter, below the 19.2% in the previous three-month period, according to Visible Alpha data. (Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Mike Colias and Anil D’Silva)
