Tesla Just Delivered Record Sales—So Why Did the Stock Sell Off?

Summary

Tesla Today$319.69 -54.32 (-14.52%) As of 07/23/2026 04:00 PM Eastern52-Week Range$297.82▼$498.83P/E Ratio296.01Price Target$406.42 On paper, Tesla Inc. NASDAQ: TSLA just had one of the best quarters in its history. Revenue climbed 26% year-over-year, pushing the company past $100 billion in trailing 12-month sales for the first time. Deliveries hit a record 480,126 vehicles, and management said it exited the quarter with its largest order backlog since 2023. However, the market has made it clear it couldn’t care less about any of that. Tesla shares gapped down at the open and were down as much as 15% intraday on July 23, wiping out every gain made since August and dragging the stock back to 2021 levels. For a company that just posted some record numbers, that's a brutal verdict. The explanation lies a few lines further down the income statement. Going into this report, deliveries were never going to be the issue. Margins were, and margins are exactly what broke. The Profitability Picture Fell ApartThe headline number was the earnings miss, with Tesla coming in roughly 35% below what analysts had penciled in. But the more troubling detail was where that miss came from. Automotive gross margins contracted at an alarming rate, while operating income collapsed 57%. That dragged operating margin down to just 1.4% of sales, from 4.1% a year earlier. To understand just how bad this looks, consider all the time and effort Tesla spent defending a margin profile that justified its premium over every other carmaker on earth. That argument just became much harder to make. Investors will have also been worried that Tesla’s reported net income was flattered by a $1 billion gain on the company’s holdings in SpaceX NASDAQ: SPCX—strip that out, and the underlying picture looks even worse than the headline suggests. Tesla Has Officially Joined the AI Spenders ClubThe bigger story, and the one that likely did most of the damage, is what Tesla is now spending. The company’s capital ex...