Tesla's Q2 deliveries far exceeded expectations and set a historic record, so why did its stock plunge 8%, marking the biggest drop in a year?

```

Tesla's global vehicle deliveries in the second quarter far exceeded market expectations, but the stock price plunged immediately after the news was released, confirming the market logic that prior gains had already fully priced in the positive outlook.

The company delivered a total of 480,126 vehicles in the second quarter, up 25% year-over-year, far surpassing the average analyst forecast of less than 400,000 vehicles compiled by Bloomberg.

Although this was Tesla's strongest second quarter ever, its stock price fell 8.2% during Thursday's New York trading session, marking the largest single-day drop in nearly a year—previously, Tesla shares had risen for four consecutive trading days, with an 8% jump on Monday alone.

Haris Khurshid, Chief Investment Officer of Chicago’s Karobaar Capital LP, commented:

"When the news actually arrives, the market has little reason to stay excited."

Meanwhile, Tesla remains behind China’s BYD in electric vehicle deliveries. BYD remains the global leader with 557,090 pure electric vehicle sales. Multiple analysts believe the better-than-expected delivery results were mainly driven by strength in the Chinese and European markets, with US demand remaining resilient despite the withdrawal of subsidies.

Strong performance in China and Europe drives deliveries above expectations

Garrett Nelson, an equity analyst at CFRA Research, said Tesla's delivery figures were "far better than expected, mainly driven by the Chinese and European markets."

Bloomberg Industry Research analyst Steve Man noted the numbers likely reflect robust export business. He said, "After the $7,500 US purchase subsidy was removed, the demand recovery was faster than expected," adding that, "as subsidies end, American competitors have contracted their business due to weaker demand, while sales in markets such as Korea and Japan remained strong, possibly boosting Tesla's deliveries."

William Blair analyst Jed Dorsheimer also said this was Tesla’s first time in a while to so significantly exceed market expectations, a positive sign for the continued competitiveness of its vehicle business. He estimated sales in North America, Europe, and China were all better than expected, and this quarter might be the last for Model S and Model X to benefit from the “last chance sale” effect.

RBC Capital Markets analyst Tom Narayan gave similarly positive remarks, calling the results "strong," and noted that other US automakers are refocusing on gasoline cars and rising fuel prices in Europe could bring extra benefits to Tesla.

Narrowed Model Lineup, Huge Capital Expansion

Currently, Tesla offers only three models to retail customers, with Model Y and Model 3 accounting for nearly all sales. Cybertruck demand remains weak; if not for SpaceX’s bulk ordering of thousands of pickups since late last year, overall delivery numbers would have been even lower.

Tesla ceased production of the Model S and Model X in May, with Musk redirecting freed capacity at the Fremont factory to build the Optimus humanoid robot. While Tesla expects to begin mass production of the Semi truck and Cybercab this year, the former targets commercial clients and the latter is still only in initial public road tests.

In terms of capital expenditure, Tesla plans to spend over $25 billion this year—about three times last year—mainly towards Optimus robots and self-driving Cybercab projects. Morgan Stanley analyst Andrew Percoco noted this quarter saw the fastest growth in Tesla’s automotive business since Q3 2023.

Energy Storage Business Recovery, Divergence in Analyst Expectations

Tesla’s energy storage business rebounded after a slow start to the year. Second quarter storage product deployments reached 13.5 GWh, up 53% from Q1.

However, opinions differ on the energy storage business. William Blair’s Dorsheimer noted the rebound was still below his firm’s expectations, though he maintains that Megapack batteries will remain a key part of AI data centers and electric infrastructure build-out.

TD Cowen analyst Itay Michaeli also thinks energy storage performance was below the market consensus.

In contrast, Morgan Stanley believes the energy storage business beat expectations and forecasts continued strong demand. Tom Narayan emphasized that structural demand growth driven by AI will benefit Tesla's energy storage business over time.

AI and Self-Driving Become the Core Drivers of Valuation

Despite better-than-expected vehicle deliveries, many analysts believe the market's focus has shifted from delivery figures to progress in AI, self-driving, and robotics.

Truist analyst William Stein maintained a "hold" rating while raising his price target from $400 to $430, and lifted his 2027 EPS estimate from $2.83 to $3.09.

He also pointed out, "Vehicle deliveries are significantly above market expectations, but Tesla has not published progress on its AI projects or new models," stressing, "Investors should pay more attention to AI projects, especially FSD advanced driver assistance. Compared to delivery numbers, AI development is more important for Tesla’s long-term cash flow and stock performance."

He described progress in self-driving as "positive but still imperfect."

Tom Narayan also commented that as Model S and Model X production ends at the close of Q1 2026, Tesla is shifting its strategic focus to Robotaxi and humanoid robot business, further diminishing traditional auto manufacturing’s role.

TD Cowen’s Itay Michaeli stated Tesla and Rivian’s results collectively support his firm’s view that "the US electric vehicle market is about to revive."

Risk Disclosure and DisclaimerThe market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions presented herein are suitable for their particular circumstances. Investing accordingly is at your own risk. ```