Margins Disappoint; Call Will Dictate Whether It Matters

Research evidence excerpt

Margins Disappoint; Call Will Dictate Whether It Matters

Update

July 22, 2026 09:33 PM GMT

Morgan Stanley & Co. LLCMTesla Inc | North America Andrew S Percoco

Equity Analyst

Margins Disappoint; Call Will Andrew.Percoco@morganstanley.comDaniela M Haigian +1 212 296-4322

Daniela.Haigian@morganstanley.com +1 212 761-6071

Dictate Whether It Matters Jahvonte G Bain

Research Associate

Jahvonte.Bain@morganstanley.com +1 212 761-9231

AlphaSignals Earnings Reaction Katherine A Bennorth

Unchanged Meaningful shortfall Modest revision lower Katie.A.Bennorth@morganstanley.com +1 212 761-3753

Impact to our thesis Financial results versus consensus Direction of next 12-month

consensus EPS

Tesla Inc (TSLA.O, TSLA US)

Source: Company data, Morgan Stanley Research

Autos & Shared Mobility | United States of America

Key Takes: Stock Rating Equal-weight

Industry View In-Line

Price target $417.00

• Margin miss across the board. Despite strong volume growth, auto and Shr price, close (Jul 21, 2026) $378.93

energy margins meaningfully missed expectations, though the margin Mkt cap, curr (mm) $1,340,654

52-Week Range $498.83-297.82

compression in ESS appears to be at least partially driven by a warranty-

related charge due to a vendor cell issue (magnitude TBD), and lower ASPs.

AI-related spend drove R&D well above expectations, negatively impacting

margins in the quarter.

• Despite weaker margins, FCF came in better (albeit still negative) on lower

capex and better working capital management in the quarter. We await an

update on the 2026 capex outlook on the upcoming call.

• FSD: 1.48m active subscribers (15.2% of installed base vs. 13.9% last quarter),

up 16% Q/Q and 56% Y/Y. Notably, >55% of deliveries in North America in

the quarter included an FSD subscription at the time of delivery.