Tesla just increased its spending plan to $25B — here’s where the money is going

Tesla CEO Elon Musk kicked off the company’s first-quarter earnings call with a monetary warning — or, depending on the investor’s mindset, a warning. Tesla’s capital expenditures will skyrocket to $25 billion by 2026, which will far exceed previous annual expenditures, as Tesla races to stay ahead of the competition and transitions into an AI and robotics company. first quarter earnings report.

That figure, which covers what Tesla plans to spend on physical assets outside of daily operating expenses, is three times higher than the annual capex budget of previous years. By comparison, Tesla’s annual capital expenditures were $8.5 billion in 2025, $11.3 billion in 2024 and $8.9 billion in 2023.

Tesla had announced in January that it expected capital expenditures to exceed $20 billion by 2026, already a substantial increase intended to cover, among other things, its AI initiatives, including investments in computing infrastructure and data centers, and the expansion and ramp-up of its manufacturing and R&D production lines.

This $5 billion increase suggests that these initiatives will require more funding than previously planned. But so far, quarterly capital expenditures of $2.5 billion were in line with previous quarters, the report shows.

Naturally, Musk sees this as a positive, a sentiment that many other shareholders will likely share as well, as it positions Tesla as a company investing in its future, namely AI and robotics.

“By 2026, we will substantially increase our investments going forward,” Musk said in the earnings call on Wednesday. “So you would have to expect a significant, very significant increase in capital expenditure, but I think this is well justified for a significantly larger future revenue stream.”

Musk was quick to note that Tesla isn’t the only company increasing its capital budget. For example, Amazon has forecast $200 billion in capital expenditures by 2026 for “AI, chips, robotics and low-Earth orbit satellites.” Google is expected to spend between $175 billion and $185 billion on capital expenditures in 2026, up from $91.4 billion the year before.

The increase in Tesla’s capital expenditures is related to Musk’s desire and ambition to develop the company beyond building and selling electric vehicles, solar energy and energy storage.

According to Musk, part of the capital expenditure will go to Tesla’s core technologies, such as the battery and AI software. The company plans to invest in AI training, chip design and “lay the foundation” for increasing manufacturing output, as well as investing in its robotaxi business and its new semiconductor research plant in Austin.

The Fremont, California, factory will likely suck up some of that capital as the company ends production of the Tesla Model S and Model X and begins building its humanoid Optimus robot at scale. The company said Wednesday that it has also cleared land outside its Austin factory for a dedicated Optimus production facility.

Tesla plans to increase internal production of Optimus for testing and “probably” make Optimus “usable outside of Tesla” sometime next year, he said.

Tesla is also pouring money into strengthening its supply chain “across the board,” Musk said, adding that this includes batteries, energy and AI silicon.

All of these expenses, which CFO Vaibhav Taneja said will last a few years, come at a literal cost. The company — which had a brief 4% share price rise thanks in part to unexpected free cash flow of $1.4 billion — will enter negative territory later this year, Taneja said.

Tesla shares wiped out their gains in after-hours trading when Musk and Taneja pitched these plans to investors. Yet Tesla is sitting on a lot of cash. At the end of the first quarter, Tesla reported $44.7 billion in cash, cash equivalents and short-term investments.

“While this may seem like a lot and we will have the impact of negative free cash flow for the rest of the year, we believe this is the right strategy to position the company for the next era,” Taneja said.