Tesla reported Q2 2026 revenue of $28.24 billion against an operating margin of 1.4 percent, the company's thinnest quarterly result in years, as capital expenditure surged 142 percent year-over-year to $5.8 billion directed at AI and robotics, per Tesla's Q2 2026 earnings release covered by Electrek. At the same time, xAI, now folded into SpaceXAI, generates an estimated $500 million in annualised recurring revenue against a combined valuation of $1.25 trillion.
xAI inside SpaceXAI: $42 billion raised, $500 million in ARR
Musk founded xAI in July 2023 and, within two and a half years, raised a total of $42 billion across multiple funding rounds. The final standalone close, a $20 billion Series E in January 2026 at a $230 billion valuation, was followed five weeks later by a full merger with SpaceX on February 2, 2026, creating a combined entity valued at $1.25 trillion, per ValueAddVC's analysis of the xAI valuation arc.
The AI arm now generates an estimated $500 million in annualised recurring revenue, driven primarily by Grok subscriptions and enterprise API access, per AI Business Weekly's xAI statistics tracker. Against $42 billion in total capital raised and a monthly burn rate of approximately $1 billion, that translates to roughly 1.2 cents in ARR for every dollar invested. The gap reflects xAI's heavy spending on the Colossus supercomputer cluster in Memphis and on building inference capacity at a scale designed to serve millions of Grok users globally. Inside SpaceXAI, AI workloads and Starlink's satellite connectivity infrastructure now share capital allocation decisions; the specific revenue split between the former SpaceX and xAI divisions has not been publicly disclosed. For more on xAI's hardware strategy and operating culture, see this analysis of the company's internal build approach.
Tesla: record revenue, profit under pressure
Tesla's Q2 2026 results showed both sides of Musk's resource allocation. Revenue of $28.24 billion rose 26 percent year-over-year and beat Wall Street's $25.55 billion consensus estimate. The profit picture diverged sharply: earnings per share came in at $0.33 against a consensus of $0.49, while operating income fell 57 percent year-over-year to $398 million, per the Tesla Q2 2026 press release. That compression placed operating margin at 1.4 percent.
Automotive gross margin excluding regulatory credits fell to 16.3 percent in Q2, down from 19.2 percent in Q1 2026. The energy segment's gross margin dropped from 39.5 percent to 20.4 percent. Capital expenditure surged to $5.8 billion (+142 percent year-over-year), producing negative free cash flow of negative $1.1 billion. Tesla attributed the CapEx increase to accelerated AI, robotics, and autonomous systems infrastructure investment, per Electrek's earnings report. TSLA shares fell 14.52 percent on July 23 as investors responded to the EPS miss and margin compression rather than the revenue beat.