Tesla sold 25% more cars and made 57% less operating profit. The AI spending is the reason.

Tesla’s Q2 revenue hit $28.24B (+26%) with record 480,126 deliveries. Operating income fell 57% to $398M. R&D jumped 49% to $2.37B. Adjusted EPS of $0.33 missed the $0.51 estimate.

Tesla delivered 480,126 vehicles in the second quarter, its highest-ever quarterly total, and generated record revenue of $28.24 billion, up 26% year-on-year. Operating income fell 57% to $398 million. Adjusted earnings of 33 cents per share missed the 51-cent consensus by a wide margin. Shares fell roughly 4% after hours.

The gap between the top line and the bottom line tells the story. Automotive gross margin fell to 16.3%. Average revenue per vehicle dropped from $45,345 to $42,730. Regulatory credit revenue, the money Tesla earns by selling emissions credits to other automakers, collapsed 67% year-on-year to $146 million. Model 3 and Model Y accounted for 467,762 of the 480,126 deliveries, meaning Tesla’s core business is two cars selling for less money at thinner margins while the credits that once padded the bottom line evaporate.

The energy storage business was a bright spot, deploying a record 13.5 gigawatt-hours of battery capacity. But the core problem remains: Tesla is selling more cars and making less money from each one. Rivian’s R2 has entered Tesla’s core price segment , and the competitive pressure on Model 3 and Model Y pricing is structural, not cyclical. Tesla is asking investors to accept shrinking automotive profits while it spends billions building businesses that do not yet contribute to earnings. The stock’s reaction suggests Wall Street is running out of patience with the ask.