Tesla reported negative free cash flow in the second quarter for the first time in two years as the Elon Musk-led EV maker accelerated spending on AI infrastructure, battery capacity, robotics and next-generation manufacturing.

Tesla reported negative free cash flow of $1.1 billion, compared with analysts’ expectations for a cash burn of $3.3 billion, according to data compiled by LSEG. Tesla delivered 480,126 vehicles in the second quarter, above Wall Street expectations and up from 384,122 vehicles a year earlier. The company produced 451,758 vehicles, meaning deliveries during the quarter exceeded production by more than 28,000 vehicles, reversing the inventory build seen earlier in the year.

Tesla also deployed 13.5 GWh of energy storage products in the quarter, up from 8.8 GWh in the first quarter and 9.6 GWh a year ago.

Its core automotive business remains under scrutiny as competitors introduce new models, often at lower prices, while the company relies more on its Model 3 compact sedan and Model Y SUV for volume.

Tesla has tried to stimulate demand with lower-priced trims, including affordable versions of the Model 3 and Model Y late last year, and this month’s launch of a six-seater variant of the Model Y in the United States, where the elimination of a key tax credit last year has hit demand.

Wall Street expects Tesla to deliver about 1.7 million vehicles in 2026, according to Visible Alpha data. That suggests growth from last year’s levels, but analysts remain divided on whether that reflects sustained demand or timing effects after a weak first quarter.

Analysts say the momentum may be difficult to sustain, with third-quarter growth facing a higher rate after a strong performance in the same period last year.

Investors have increasingly focused on Musk’s push into self-driving technology and robotics, seeking clear evidence that Tesla’s autonomy story is shifting from promise to commercial reality.

Tesla’s energy generation and storage unit has emerged as a key counterweight to the auto business, helped by demand for renewable energy, data centers and grid-scale batteries that support electricity-network stability.

Tesla has said it has expanded its unsupervised robotaxi service in Austin and launched unsupervised rides in Dallas and Houston in April. The company also operates a robotaxi service in Miami, expanding service to Orlando and Tampa. Tesla has previously identified Phoenix and Las Vegas as future expansion markets.

The company received approval in April to deploy its advanced driver assistance software – called Full Self-Driving Supervised – in the Netherlands. Several other European countries have also approved the technology following the Dutch approval.

A key vote to decide on Europe-wide approval for the technology is expected later this year. Tesla is also pushing for approval in China.

Tesla shares are down more than 15% this year. At about $1.4 trillion, it is the world’s most valuable automaker by a wide margin, reflecting investor expectations that self-driving software, energy storage, robotaxis and humanoid robots could eventually deliver more margin growth than vehicle sales.