Tesla stock fell as much as 15% on Thursday, its worst intraday drop in more than a year, after second-quarter profit missed Wall Street expectations
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Investors sold off the stock after the earnings shortfall revived anxiety about how aggressively Tesla is directing capital toward artificial intelligence and robotics projects. Adjusted earnings per share came in at $0.33, well below the $0.51 analysts had expected. Revenue of $28.24 billion beat estimates but did not offset the profit shortfall.
About 3% of Tesla's outstanding stock is sold short, according to data from S3 Partners cited by Bloomberg. Ihor Dusaniwsky, managing director at S3 Partners, provided the profit estimate. Following Thursday's decline, Tesla stock is down nearly 30% in 2026, leaving short sellers with paper gains of roughly $8.92 billion for the year.
Among the Magnificent Seven, no member carries a larger short position than Tesla. Meta $META Platforms is the next most heavily shorted name in the cohort, yet only 1.6% of its float is sold short.
The earnings results showed a record delivery quarter of 480,126 vehicles and revenue that crossed $100 billion on a trailing twelve-month basis, but those gains were overshadowed by a sharp drop in profitability. GAAP operating income fell 57% year over year to $398 million, with operating margin narrowing to 1.4%. Capital expenditures jumped 142% to $5.79 billion as Tesla increased spending on AI infrastructure, and the company reported a free cash flow deficit of $1.09 billion for the quarter.
The AI conversation surrounding Tesla diverges from the one playing out at other large technology companies. Rather than fretting about overcapitalization, a portion of Tesla's shareholder base is concerned the company is lagging on commercializing robotaxis and humanoid robots, and weakening vehicle margins have prompted fresh scrutiny of whether the core automotive operation can bear the cost of those longer-term bets. BNP Paribas Analyst James Picariello kept his sell-equivalent rating and $280 price target in place, cautioning in a note that Tesla's "exceedingly aggressive capex timeline" raises concern about the pace of its AI progress relative to the expectations already priced into its shares, according to Bloomberg.
Not all market participants turned negative. Retail traders were net buyers of Tesla shares on Thursday to the tune of $42 million, making it the top retail purchase of the session.
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