Tesla Q1 Revenue Up 16% as AI Costs Squeeze Margins
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- Tesla reported Q1 2026 revenue of $22.4 billion (+16% YoY) and net income of $477 million (+17%), but operating expenses surged 37% to $3.78 billion.
- Operating margin fell to 4.2%, declining sequentially for the second consecutive quarter, as Musk warned of "a very significant increase in capital expenditures" on the earnings call.
- Tesla discontinued the Model S sedan and Model X crossover to free up Fremont factory capacity for Optimus robot pilot production, targeted for 2026.
- The company said Cybercab will eventually replace the Model Y as its highest-volume vehicle, with volume production of Cybercab and the electric Semi also expected in 2026.
- Q1 EV deliveries of 358,023 missed consensus estimates of 370,000 — Wedbush analyst Dan Ives called it an "underwhelming start" to the year.
- Tesla is partnering with SpaceX, which is approaching an IPO, to build what it called "the largest chip fab ever," citing anticipated demand exceeding existing industry capacity.
Why it matters: Tesla is cannibalizing its core auto business — killing the Model S and X, planning to sideline Model Y for Cybercab — to fund Optimus robots and a mega chip fab with SpaceX. With margins already at 4.2% and falling for two straight quarters, and deliveries missing estimates by ~12,000 units, the EV core is weakening just as capex ramps.
