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

https://www.axios.com/2026/04/02/tesla-ev-elon-musk-gas-prices" target="_blank">Tesla reported an uptick in quarterly revenue and profit, but the costs of pivoting to https://www.axios.com/2025/09/02/musk-tesla-optimus" target="_blank">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 https://assets-ir.tesla.com/tesla-contents/IR/TSLA-Q1-2026-Update.pdf" target="_blank">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 https://www.axios.com/2026/01/28/tesla-model-s-model-x-discontinued" target="_blank">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 https://www.axios.com/2025/04/22/elon-musk-doge-tesla-earnings-call" target="_self">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.