🚖 Tesla: $25 Billion AI Pivot
Musk makes a massive infrastructure bet on AI & robotics
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Today, the spotlight is on Tesla and Intel, two companies now tied together by Musk’s Terafab project. Here’s what their latest results revealed.
🚖 Tesla: $25 Billion AI Pivot
🏭 Intel: CPU Renaissance
🚀 SpaceX: Potential Cursor Acquisition
1. 🚖 Tesla: $25 Billion AI Pivot
Tesla’s AI and robotics pivot got materially more expensive this quarter.
Management raised FY26 CapEx guidance to $25 billion, up sharply from $9 billion in FY25, to fund projects tied to AI training clusters, Terafab, and Optimus 3.
With the AI5 chip already taped out and a $3 billion dedicated research fab under construction at Giga Texas, Tesla is investing beyond vehicles and into the physical infrastructure behind its AI ambitions.
Income statement:
Revenue grew 16% Y/Y to $22.4 billion ($0.2 billion beat).
Gross margin reached 21% (+5pp Y/Y).
Operating margin improved to 4% (+2pp Y/Y).
Non-GAAP EPS was $0.41 ($0.06 beat).
Cash flow:
Operating cash flow grew 17% Y/Y to $0.5 billion.
Free cash flow grew 117% Y/Y to $1.4 billion.
FY26 outlook:
Tesla again withheld full-year guidance. Management continues to improve overall profitability over time, as AI, software, and fleet-based profits boost the existing hardware-related baseline.
So, what to make of all this?
🚘 Automotive held up: Automotive revenue grew 16% Y/Y, showing signs of life after a difficult 2025. Tesla delivered 358K vehicles in Q1, missing the 365K consensus. It was still 6% above last year’s soft comparison, when factory retooling and protests weighed on results. Some of that volatility may also reflect lingering distortion from the EV tax credit deadline, which pulled demand forward before its September 2025 expiration.
⚡️ Energy lumpiness: The Energy segment saw a 12% revenue decline as storage deployments fell to 8.8 GWh, down sharply sequentially. Management said the business remains inherently lumpy because results depend on customer deployment timing, but still expects FY26 deployments to exceed FY25.
🔌 Services and Other surge: Revenue in Services and Other jumped 42% Y/Y to $3.8 billion, helped by the Full Self-Driving (FSD) subscription moving from $8,000 for lifetime access to $99/month, plus record Supercharger usage. With FSD subscribers up 51% Y/Y to 1.28 million, Tesla is steadily turning its installed base into a higher-margin recurring revenue stream.
📈 Margin recovery with a catch: Gross margin climbed to 21%, but the improvement was heavily aided by non-recurring windfalls, including $230 million in Automotive warranty write-downs and $250 million in Energy tariff recognitions. The headline improvement looked encouraging, but these one-time items partly masked pressure from excess inventory and softer global demand.
🚧 The Hardware 3/4 operational burden: Musk said Hardware 3 lacks the memory bandwidth for future autonomy, pushing Tesla toward Hardware 4 and beyond. To manage the retrofit process, Tesla plans dedicated city-based retrofit centers and a separate v14 software update path for HW3. That expands the cost and complexity of supporting a massive legacy fleet while trying to move the platform forward.
🚖 Robotaxi rollout: Following the Austin launch, Tesla has officially expanded its unsupervised Robotaxi service to Houston and Dallas. The service is slated for a rapid multi-state expansion (targeting 12+ states by year-end). The bigger message was that Cybercab development remains on schedule for 2026. The risk is that regulatory approvals now matter as much as technical progress.
💰 Free cash flow warning: Tesla’s balance sheet grew to $44.7 billion in cash, a critical war chest given the road ahead. While Q1 produced a surprise $1.4 billion in positive free cash flow, management warned that the heavy $25 billion CapEx cycle will likely push FCF into negative territory for the remainder of 2026. This cash burn phase is the price of admission for the growth expected from Cybercab and Semi volume production in late 2026.
Bottom Line: Tesla is spending like a company that wants to own the full AI mobility stack, not just sell more cars. The quarter showed an auto business that is holding up, a services engine that is gaining quality, and a balance sheet still strong enough to fund the push. The trade-off is obvious: free cash flow could come under pressure as CapEx surges. But management is clearly choosing long-term platform control over near-term efficiency.
2. 🏭 Intel: CPU Renaissance
Intel is finally seeing the payoff from its reset, as AI inference and agentic workloads lift demand for CPUs, wafers, and advanced packaging.
While Intel missed the first GPU-led wave, surging demand for Xeon server processors helped drive a major revenue and adjusted EPS beat this quarter.
With a strategic role in the Terafab project and the repurchase of its Irish fabrication facility, Intel is repositioning its balance sheet to reclaim a larger role in global AI infrastructure.
Income statement:
Revenue grew 7% Y/Y to $13.6 billion ($1.2 billion beat).
Gross margin improved to 39% (+2pp Y/Y).
Operating margin was -23% (-21 pp Y/Y).
Non-GAAP EPS $0.29 ($0.28 beat).
Cash flow:
Operating cash flow grew 35% Y/Y to $1.1 billion.
Free cash flow improved to an outflow of $2.0 billion.
Q2 FY26 outlook:
Revenue ~$14.3 billion ($1.2 billion beat).
Non-GAAP EPS $0.20 ($0.12 beat).
So, what to make of all this?
🧠 CPU Renaissance: Intel’s Data Center and AI revenue rose 22% to $5.1 billion as inference and agentic workloads boosted demand for Xeon. As AI shifts from training giant models to serving real-world applications, the CPU is becoming more central to the data center stack again.
📉 Foundry momentum: Foundry revenue rose 16% to $5.4 billion, while Client Computing revenue was held back by supply constraints and a still-tight PC environment. The move toward higher-priced AI PCs helped support an adjusted gross margin of 41%. The bigger takeaway is that Intel now looks more constrained by supply than by demand.
🏭 Terafab strategic pivot: Intel is joining the Terafab project as a strategic partner, offering design and advanced packaging resources for the Austin-based facility. This partnership, alongside the US government’s 10% stake, secures Intel’s position at the heart of the Sovereign AI movement and strengthens the strategic case for its Foundry Services division.
💰 Balance sheet flex: Intel repurchased the 49% stake in its Fab 34 joint venture in Ireland for $14.2 billion, reclaiming full control of a strategic manufacturing asset. The move signals growing confidence in long-term demand and in Intel’s ability to fund its next phase from a stronger footing.
🚀 Guidance blowout: Intel guided Q2 revenue to $13.8 billion–$14.8 billion, well above expectations. The message was clear: demand is there. The next challenge is scaling production and packaging capacity fast enough to keep up.
Bottom Line: Intel is no longer just a turnaround story. It is becoming a capacity story. The quarter showed that Xeon, packaging, and foundry demand are all benefiting from the shift toward inference and agentic AI. The question now is less whether Intel is relevant and more whether it can scale supply fast enough to match the opportunity.
3. 🚀 SpaceX Might Acquire Cursor
SpaceX is pushing deeper into AI. After its $250 billion merger with xAI in February, the company announced a major partnership this week with Cursor, a leader in vibe coding.
The structure is unusual. SpaceX has the option to acquire Cursor later this year for $60 billion, or pay $10 billion fee tied to the partnership if a full acquisition does not happen.
Bridging the coding gap
The timing of this deal suggests where Musk sees a gap in his AI strategy. Despite xAI’s massive valuation, Musk admitted last month that his chatbot, Grok, was “behind in coding” and needed a complete rebuild.
Cursor brings something xAI’s giant compute buildout still does not: a product developers already use at scale. This is not just about fixing Grok’s coding weakness. It is also about connecting compute to an app layer that already matters.
By partnering with Cursor, SpaceX gets a shortcut into one of the most valuable layers of the AI stack:
Compute play: Cursor has been constrained by limited processing power. SpaceX is solving this by giving them access to Colossus, a supercomputer powered by 200,000 NVIDIA GPUs (equivalent to a million H100s).
Talent pull: xAI has already hired two of Cursor’s senior engineering leads to report directly to Musk. A full acquisition would consolidate top coding talent under one roof.
Model leverage: Cursor relies on models from rivals today, but a deeper partnership could move more of that stack closer to xAI over time.
Data advantage: Cursor may hold one of the richest proprietary datasets on how developers interact with coding models in the wild, which could become valuable training fuel over time.
Cursor also has a reason to lean in. It depends on rival models today, leaving it exposed as the frontier labs push deeper into coding themselves.
Why not buy it now?
The structure may also reflect timing. With SpaceX preparing for an IPO, a full acquisition now could complicate the story and force broader disclosure changes. A partnership-first approach gives Musk a way to lock Cursor closer to the ecosystem without pulling the trigger immediately.
Bottom Line: SpaceX is using its compute advantage to accelerate its AI push without committing to a full acquisition today. The Cursor deal helps close a product gap now while reinforcing a bigger idea for investors: SpaceX is becoming a hybrid of satellite platform, launch infrastructure, and AI optionality.
Stay tuned for our full breakdown of the company’s financials once the S-1 goes live in the coming months.
That’s it for today!
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Author’s Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization’s views.
Disclosure: I am long TSLA, GOOG, and NVDA in the App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.