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Tesla on Tuesday had a lackluster earnings report that revealed the electric vehicle maker once again missed investor expectations.
And Elon Musk is probably a little nervous.
Though the automaker had slightly better-than-expected revenue, the Q2 earnings showed Tesla's adjusted earnings margin dropped from 18.7% to 14.4% year-over-year, its free cash flow was short of analyst expectations by more than half a billion dollars, and its earnings per share fell from 91 cents a year ago to 52 today.
The billionaire Tesla CEO fielded several terse questions from investors and analysts on topics including the company's slipping revenue from auto sales, continued delays to its Robotaxi project, and whether the company's current strategy is to continue with limited-release models rather than invest in large-scale production of a lower-cost model.
"We're going to make great products in the future, just like we have in the past. End of story," Musk replied bluntly.
Among the most tense exchanges was when an analyst pressed Musk about reports that his artificial intelligence startup xAI had hired engineers away from Tesla and that Musk had diverted GPUs destined for Tesla over to xAI.
"How do you make allocation decisions among these various ventures, and how do you make Tesla owners comfortable that you're doing it in a way that really benefits them?" the analyst asked.
Musk seemed to bristle before responding that news of the diversion of the GPUs was an "old article" and that Tesla had rerouted the systems because it had no place to store them — but his fledgling company xAI did.
"I want to be clear that was in Tesla's interest, not contrary to Tesla's interest," Musk said.
Rather than reassuring investors that the company is in a strong position to rebound, Musk's comments during the call appear to have done the opposite. By the time he signed off, Tesla shares fell more than 7% in after-hours trading.
Some analysts remain bullish on Tesla's outlook, such as Gene Munster, a managing partner at Deepwater Asset Management, who told CNBC he believes Tesla is "firmly on track" to become a company with a $3 trillion market cap in the coming years.
But Musk has reason to be concerned about the EV company's performance right now.
Tesla is facing decreased buyer enthusiasm and, despite offering discounts that ate into the company's profitability, weakening demand. Though Musk has promised the development of innovations like the Robotaxi and lower-cost models for widespread adoption, those visions haven't come to fruition yet.
In Q2 earnings, Tesla reported a 7% decrease in year-over-year automotive revenue, which contributed to the company's diminished profits.
Not to mention increasing competition around the globe — such as China's rapid expansion in the sector — which Musk acknowledged on the call is of notable concern for the company.
"There are quite a few competing electric vehicles that have entered the market," Musk said. "Mostly, they have not done well, but they have discounted their EVs very substantially, which has made it a bit more difficult for Tesla."
The complications are compounded by the company's heavy investment in artificial intelligence, which CNBC reported has increased expenditures by 10% from a year ago to $2.27 billion, further shrinking the company's margins.
Tesla's Q2 numbers are the second quarter in a row in which the company's profit has sunk, with the worst margins Tesla has seen in five years, per Reuters. The disappointing results come shortly after shareholders re-approved Musk's massive 10-year $46.8 billion pay package.
Dan Coatsworth, investment analyst at AJ Bell, told Reuters that Tesla has now missed its earnings targets for four quarters in a row, discouraging some investors despite Musk's continued optimistic promises for the company's outlook.
"There is a lot of talk about robotaxis, humanoid robots, and autonomous driving, which provides an exciting narrative for investors but doesn't get over the fact that these are tomorrow's potential riches, not today's," Coatsworth said.
Representatives for Tesla did not immediately respond to a request for comment from Business Insider.
