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.
