🚖 Tesla: Cash Burn Begins
AI ambitions are outgrowing cash flow
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🗓️ Earnings season is picking up speed
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Today, we look at Tesla’s earnings and Uber’s biggest acquisition yet.
🚖 Tesla: Cash Burn Begins
■ Uber: The $15 Billion Order
🚖 Tesla: Cash Burn Begins
Tesla got its demand mojo back. Deliveries hit a Q2 record of 480K vehicles, and trailing-twelve-month revenue crossed $100 billion for the first time.
Yet shares plunged nearly 14%, their worst post-earnings decline since 2013.
Operating profit fell 57% to just $398 million, while free cash flow turned negative. Last quarter, we flagged that Q1’s margin beat leaned on one-time items and that Tesla’s $25 billion CapEx cycle would push free cash flow negative. Both arrived in Q2.
Income statement:
Revenue grew 26% Y/Y to $28.2 billion ($1.7 billion beat).
Gross margin was 17% (-0pp Y/Y and -4pp Q/Q).
Operating margin fell to 1% (-3pp Y/Y).
Non-GAAP EPS was $0.33 ($0.21 miss).
Cash flow:
Operating cash flow grew 85% Y/Y to $4.7 billion.
Free cash flow swung from positive $0.1 billion last year to negative $1.1 billion as CapEx jumped 142% to $5.8 billion
FY26 outlook:
Tesla again withheld full-year guidance. CapEx will exceed $25 billion this year (outlook unchanged), and keep growing for another two to three years as Tesla expands Robotaxi, Optimus, AI compute, semiconductor, solar, and manufacturing capacity.
Management is also securing debt facilities that could provide up to $30 billion of borrowing capacity. Tesla still has $43.5 billion of cash and investments, but debt is becoming part of the funding plan.
So, what to make of all this?
🚘 Demand came back: Automotive revenue grew 23% Y/Y to $20.5 billion as deliveries increased 25% to 480K, roughly 74K above the company-compiled consensus. Tesla also said it exited Q2 with its largest order backlog since 2023. Management called FSD a major demand driver, with nearly 1.5 million paid customers and attach rates above 55% on new North American deliveries. The constraint has now shifted toward supply, particularly batteries and electronic components.
⚡️ Energy delivered volume, but not margin: Storage deployments reached 13.5 GWh, up 41% Y/Y and 53% sequentially, making Q2 Tesla’s second-largest quarter ever. But energy gross margin fell from 40% to 20% because of a $240 million warranty adjustment, the absence of Q1’s tariff benefit, and falling industrial-storage prices. Management expects margins to settle in the low-to-mid 20s.
🔌 Services quietly became the bright spot: Services revenue jumped 50% Y/Y to $4.6 billion, while gross margin climbed from 9% to a record 14%. Growth came from used vehicles, Supercharging, service centers, and insurance. These are no longer negligible side businesses.
📉 Q1’s margin support disappeared: Automotive gross margin excluding credits fell from 19% to 16%. Q1 included a $230 million warranty benefit and tariff relief that did not repeat, and management said underlying margins were roughly flat after adjusting for them. Meanwhile, operating expenses rose 47%, primarily due to AI, pre-production R&D, and stock-based compensation. It left operating profit at roughly one-quarter of consensus. Net profit of $1.1 billion looked healthier, but included a $1.0 billion unrealized gain on Tesla’s SpaceX stake.
💸 Cash burn begins, and debt enters the plan: CapEx more than doubled sequentially to $5.8 billion, pushing free cash flow to negative $1.1 billion. Tesla spent just $8.3 billion in the first half, so its greater-than-$25-billion outlook implies at least $16.7 billion in H2—more than double H1. Tesla has ample liquidity, but the funding model is changing. The company is preparing to add leverage.
🚖 Robotaxi keeps a limited scale: Robotaxi now operates in seven metros. Tesla says its unsupervised fleet has driven more than 380K miles across six cities, with weekly mileage growing at a double-digit rate. But Tesla remains early: Waymo has already accumulated roughly 220 million autonomous miles. Cybercab has entered production and is accumulating the calibration miles required to scale.
🤖 Optimus remains the hardest ramp: Tesla is replacing the Model S and X lines at Fremont with its first Optimus production lines. Musk called it the hardest manufacturing ramp Tesla has attempted, warning that the early portion of the production curve will be “flat and long.”
Bottom Line: Tesla delivered a strong quarter for demand, but investors rejected the economics. The nearly 14% sell-off shows the market is becoming less willing to let future AI opportunities offset weak current profits.
Tesla may be right to spend aggressively if Robotaxi, Optimus, and its AI infrastructure produce the returns Musk expects. But more than two-thirds of this year’s CapEx is still ahead, while the businesses meant to justify it have yet to contribute meaningfully to earnings. Tesla has the balance sheet to finance the wait, but the market remains skeptical.
■ Uber: The $15 Billion Order
Uber is making its biggest acquisition yet: $15 billion for a global delivery footprint it could not build market by market.
On July 16, Uber agreed to acquire Delivery Hero, the Berlin-based group behind foodpanda, Glovo, talabat, and Korea’s Baemin. The company will pay €41.50 per share in cash, up from the €33 it floated in May.
Uber already owned 25% outright and held another 12% of economic exposure through financial instruments. Prosus has irrevocably committed its remaining 17%, taking Uber’s economic interest to roughly 53% before other shareholders tender.
Why now? Delivery Hero gives Uber leading local brands across Asia, Latin America, the Middle East, and parts of Europe. Uber will acquire businesses in 50 markets that generated $42 billion in gross bookings last year once you carve out 14 overlapping markets.
Uber wants to connect Delivery Hero’s customers with its mobility network. Uber’s platform will expand from 79 to 99 markets, with combined 2025 gross bookings of $236 billion. The number of markets where it runs both rides and delivery will nearly double, from 34 to 58.
Uber says cross-platform users generate ~3x the gross bookings and profits of customers using only one service, while acquiring them through an existing platform costs more than 50% less than paid marketing. A food customer can become a rider, a rider can become a food customer, and Uber One becomes more useful to both.
The price looks steep at ~14x EBITDA before synergies for a sprawling, relatively low-margin delivery business. But Uber CFO Balaji Krishnamurthy is targeting $1.2 billion in run-rate synergies within 18 months, mostly from moving Delivery Hero onto Uber’s tech stack. If Uber captures the full $1.2 billion, management says its effective multiple falls to ~8x 2027 adjusted EBITDA. Uber calls the deal accretive to non-GAAP EPS from close.
Why it matters
The scale game: DoorDash bought Deliveroo. Prosus took Just Eat Takeaway. Food delivery rewards density, and the last independents are running out of room to stay independent.
The regulatory tax: Uber pre-sold 14 overlapping markets (including Türkiye, Spain, Poland, and others) to SSW Partners for ~$1.6 billion to ease antitrust review. A second-half-2027 target close tells you Brussels won’t wave this through.
The AV hedge: There is also a defensive angle. A much larger delivery network gives Uber another source of demand and customer engagement if autonomous competitors eventually pressure the economics of ride-hailing.
Bottom Line: Uber paid up for a target whose largest shareholders wanted an exit, then structured the deal to improve its odds with regulators. If the promised $1.2 billion of synergies arrives, the effective 8x multiple could look compelling. But it does come with some execution risks The integration will not begin until the deal closes, likely in late 2027.
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, UBER, GOOG, and NVDA in the App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
I enjoyed the way you separated demand from economics. The delivery numbers looked encouraging, but what stood out to me was the shift in free cash flow. From an investing perspective, the question isn't whether Tesla can spend aggressively, but whether those investments eventually generate returns that justify today's cash burn.
Elon buying his own cars to cook the books again. Snakeoil salesman