Tesla heads toward its first cash burn in two years as AI spending hits $25 billion

Tesla is on track to report its first quarterly cash burn in more than two years, a sign of how much CEO Elon Musk is betting on artificial intelligence, robotaxis, and humanoid robots to drive the company’s next chapter.

Wall Street expects Tesla’s second-quarter results on Wednesday to show that spending on AI infrastructure and manufacturing is now outpacing the cash generated by its core electric vehicle and energy businesses. That shift is putting fresh attention on a question investors have been asking for months: When will Tesla’s AI investments begin delivering meaningful financial returns?

Musk has spent the past two years repositioning Tesla from an electric vehicle maker into what he calls a physical AI company. The strategy centers on self-driving robotaxis, the Optimus humanoid robot, and the computing infrastructure needed to support them. Much of Tesla’s market value now rests on the belief that those businesses will eventually produce high-margin revenue far beyond selling cars.

The price tag is climbing quickly.

Tesla’s $25 billion AI push puts cash flow under pressure ahead of earnings

Tesla is projected to spend about $25 billion on capital expenditures this year, including new AI data centers, computing hardware, and manufacturing capacity, Reuters reported. Analysts expect that level of investment to exceed the cash generated from Tesla’s automotive and energy operations during the quarter.

Morgan Stanley analysts said the sharp increase in spending has shifted investor attention away from near-term earnings and toward whether Tesla is building a lasting advantage in physical AI.

“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,” the firm wrote in a research note.

The pressure is growing as Tesla’s biggest AI projects continue moving more slowly than many investors expected.

Shortly after launching its robotaxi service in Austin in April last year, Musk said Tesla robotaxis would serve half of the U.S. population by the end of 2025. Tesla later announced plans to expand the service to seven additional cities during the first half of 2026.

That rollout has yet to materialize. Tesla’s robotaxi service currently operates only in Austin, Dallas, Houston, and Miami.

Retail investors appear eager for answers. Ahead of Wednesday’s earnings call, the highest-ranked question on Tesla’s investor relations website asks, “What is keeping Tesla back from accomplishing these short-term goals that they’ve set for themselves?”

Nine of the ten most popular questions submitted by investors focus on Tesla’s AI strategy, including robotaxis, Optimus, Full Self-Driving, and the long-awaited Cybercab.

One investor asked, “Why has growth of robotaxi vehicles stalled? When will we see Cybercab start customer rides?”

Tesla says production of the Cybercab has begun. The purpose-built autonomous vehicle has no steering wheel or pedals and is intended exclusively for robotaxi service. Musk has cautioned that manufacturing will scale slowly, describing the production ramp as “agonizingly slow.”

The company’s traditional auto business, meanwhile, is showing signs of recovery.

Tesla delivered a record number of vehicles during the April through June quarter, comfortably beating analyst estimates. Higher oil prices helped boost demand for electric vehicles, particularly across Europe.

Analysts now expect Tesla to deliver about 1.7 million vehicles in 2026, a 3.9% increase from last year. That would end two consecutive years of declining annual deliveries.

A healthier automotive business could provide the cash needed to fund Tesla’s AI ambitions. Barclays analysts say investors remain focused on AI, though stronger vehicle sales would give the company greater financial flexibility as those projects continue to grow.

For the second quarter, consensus estimates compiled by LSEG point to negative free cash flow of about $3.3 billion, marking Tesla’s first quarterly cash burn in more than two years.

Wall Street expects earnings of 50 cents per share, up from 40 cents a year earlier.

Profit margins are likely to remain under pressure. Deutsche Bank analysts expect changes to Tesla’s Full Self-Driving software pricing earlier this year, combined with low-interest financing offers introduced in May, to weigh on profitability.

Visible Alpha estimates Tesla’s automotive gross margin, excluding regulatory credits, will come in at 18.1% for the quarter, down from 19.2% in the previous three months.

Wednesday’s earnings report may offer the clearest look yet at the tradeoff Musk is making. Tesla is spending billions today to build an AI-driven future. Investors now want proof that those investments can produce returns before the company’s cash reserves begin shrinking for more than a single quarter.