Tesla stock falls 6% as earnings expose margin pressure
Strong revenue failed to offset Tesla’s weak profitability and negative free cash flow. The market responded with a wide gap down, increasing the risk of a deeper correction in the stock.
Tesla delivered a mixed second-quarter report. Revenue reached $28.24 billion and exceeded expectations, supported by strong results from the automotive and services businesses. The number of FSD subscribers increased to 1.48 million.
However, profitability disappointed the market. Adjusted earnings came in at $0.33 per share versus the expected $0.55, while gross margin reached just 16.8% compared with a forecast of 19.5%. Revenue from the energy business also missed expectations.
Another concern was capital expenditure of $5.79 billion, which pushed free cash flow to negative $1.09 billion for the first time in two years. Higher sales have yet to translate into comparable profit growth amid discounts and substantial investment in AI, robotaxis and Optimus.
Downside risk grows after a sharp earnings selloff
In premarket trading, Tesla shares fell towards $350.80, losing around 6% from the previous session’s close and creating a wide gap down.
The previous analysis noted that the quarterly report could trigger a sharp move in either direction. That scenario played out, with weak profitability outweighing strong revenue.
The nearest support level is $349.50. Trading against the direction of an earnings-driven gap down remains highly risky. If this support breaks, $336.20 will become the next downside target.
For long positions, it would be safer to wait for the price to stabilise, volatility to decline and a local bottom to form. An initial recovery signal would be either a successful test and defence of $349.50 or a move back above the previously broken $368 level.
Earnings gaps expose the risks of leveraged positions
Yesterday’s warning about the possibility of a wide price gap proved justified. Holding a short-term position through an earnings release effectively amounts to a binary bet in which luck, rather than analysis, plays a significant role.
It is therefore especially important to reduce leveraged exposure ahead of earnings. A gap can jump past a stop-loss order and result in losses that exceed the predefined risk..
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