Tesla’s $25 Billion Capex Gamble Meets a Wall of Unsold Cars

Tesla’s first-quarter earnings for 2026 presented a stark dichotomy: a headline earnings beat overshadowed by swelling inventory and a massive, unexpected ramp in capital spending. While adjusted earnings per share of $0.41 surpassed the $0.37 consensus, the subsequent investor call revealed plans for over $25 billion in investments this year, sending the stock lower.

The company delivered 358,023 vehicles in Q1, falling short of expectations by roughly 7,600 units. More telling was the production figure of 408,386 cars, leaving an inventory overhang of approximately 50,000 vehicles. This stockpile is expected to pressure margins in the coming quarter, despite a reported gross margin of 21.1%—the highest in several quarters, boosted by one-time effects like expiring tariffs and adjusted warranty provisions.

Demand signals from key markets are flashing warning signs. In Tesla’s crucial home state of California, new vehicle registrations plummeted 24.3% in the first quarter, the steepest decline of any brand. Although the Model Y retained its title as the state’s best-selling vehicle, the trend is concerning. Revenue of $22.39 billion also narrowly missed the $22.64 billion forecast.

CEO Elon Musk aggressively pivoted the narrative toward autonomy and artificial intelligence. He announced that Tesla’s unsupervised robotaxi system would be operational in about a dozen U.S. states by year-end. The service has already launched in Dallas and Houston following initial deployments in Austin and the Bay Area, with the Cybercab slated to enter series production this month. However, Musk tempered expectations, noting meaningful revenue from this segment is not anticipated until 2027.

A significant hurdle for existing customers emerged. Vehicles equipped with the older Hardware 3 computer will not support the new autonomous system and require a costly upgrade to Hardware 4 to join the future robotaxi fleet.

Should investors sell immediately? Or is it worth buying Tesla?

The autonomy push is part of a broader, expensive strategic shift. Capital expenditures surged 67% in the first quarter alone. The official investment guidance was raised by $5 billion to over $20 billion, but that figure notably excludes “Terafab,” a planned one-terawatt AI data center in Texas. According to Reuters and Bloomberg, Tesla’s team has already contacted several suppliers for this project.

Alongside its automotive challenges, Tesla is expanding into robotics. Its Fremont factory will begin preparing for production of humanoid Optimus robots in the second quarter, targeting an eventual capacity of one million units annually. In response to intense price competition from Asian rivals like BYD and Xiaomi, Tesla also announced cheaper trim variants for the Model Y and Model 3.

The stock, trading around €334, has fallen nearly 11% since the start of the year, significantly underperforming other megacap peers. It currently trades precisely at its 50-day moving average, reflecting a market in wait-and-see mode. Analyst sentiment remains cautious; Jefferies raised its price target to $350 but maintained a “Hold” rating, echoing the widespread view that robotaxis and robots are unlikely to contribute meaningfully to earnings before 2027. The average analyst price target sits around $412.

As Tesla navigates this costly transition, its core automotive business—bolstered by new, cheaper models—must finance the billions in investments while managing a growing inventory of unsold vehicles.