General Motors reported strong second-quarter results on Tuesday, July 21, but the stock was caught up in the broader automotive sell-off spurred by Tesla’s own disappointing quarter.
GM topped analyst estimates on every level, driven by strong sales from high-margin full-size pickup trucks in North America, the company’s most profitable region. That margin strength was the opposite of what automotive rival Tesla reported in its most recent quarter.
But Tesla’s mixed quarter was pulling the entire automotive sector down this week, as the company’s margins were under pressure, despite strong demand that led to record revenue.
GM reported second-quarter earnings of $3.57 per share, easily topping analysts’ $3.20 per share expectations. Revenue of $48.03 billion also topped $47.01 billion estimates.
GM also raised its EBIT guidance to between $14 billion and $16 billion from its previous view between $13.5 billion and $15.5 billion. It also raised its full-year EPS expectations to between $12 and $14 from between $11.50 and $13.50.
Meanwhile, in the second quarter, Tesla reported record revenue of $28.24 billion, a 26% year-over-year increase that topped estimates, but the 33 cents per share it earned on that revenue widely missed Wall Street‘s consensus 50 cents per share estimates.
Tesla shares fell as low as $320 in trading the day after its earnings release.
GM is winning on margins while Tesla faces pressure
General Motors credited disciplined pricing for its strong Q2 margins as its 8.6% earnings before interest and taxes in North America grew by two-and-a-half points year over year.
But more than that broad explanation, GM CEO Mary Barra also credited a strong product portfolio, growing software and services revenue, lower warranty costs, reduced EV losses, and increased operating efficiency with helping GM improve its margins by 70 basis points over the past three years.
“Meanwhile, our broader peer set has seen margin reduction by 400 basis points,” Barra pointed out during the company’s earnings call. “We’ve just continued to perform. At the same time, our operating discipline has been a key driver of the structural improvement in our adjusted automotive free cash flow generation, which has improved from $3 billion-$5 billion annually on average over the last decade, to consistently above $10 billion since 2022.”
Demand wasn’t a problem for either GM or Tesla, as the North American market has been surprisingly resilient in the face of persistent inflationary pressure, as well as rising energy prices due to the Iran War.
GM understands that eventually those realities will show up on its balance sheet, but it is preparing for that eventuality while also reaping the benefits of the current environment.
“We haven’t quantified any of that; we’re going to see some inflationary pressures in the business. I think that’s just to be expected across the board,” Jacobson said. “What we’re really trying to do now is essentially say that many of the things that are allowing us to expand our margins in 2026 are multi-year trajectories, whether it be warranty, EV profitability, or digital revenue growth.
“…We still believe that we’ve got a good trajectory of continued margin expansion and continued EBIT growth,” Jacobson said.
Tesla chases delivery growth at the expense of margins
It’s hard to get a handle on Tesla’s current position in the market after two asymmetrical quarters.
Tesla reported second-quarter revenue of $28.2 billion, a record that topped analyst estimates of $27.6 billion. However, the 33 cents per share the company reported missed estimates from analysts polled by Tesla, who were expecting 55 cents per share.
So it seems that as Tesla chased volume, delivering 480,126 vehicles, a 25% increase from the same period a year ago, it sacrificed margins to get there. Net income for the quarter fell 17% to $1.15 billion. Analysts were expecting net income of $1.27 billion.
Meanwhile, Tesla’s results from the first quarter were flipped.
Tesla missed analyst revenue expectations, reporting $22.39 billion versus analysts’ $22.64 billion, yet earnings of 41 cents per share topped estimates of 37 cents per share.
And while margins suffered this quarter, the company did see some growth drivers outside of low-margin auto sales.
“Power generation and storage showed steady growth, showing +40% higher revenues and continued acceleration in demand,” Brian Mulberry, chief market strategist at Zacks Investment Management, told TheStreet.
“In Q2 2026, Tesla achieved a 25% year-over-year increase in deliveries to 480,126 vehicles, driven by inventory reduction and heavy promotions that, along with a 67% drop in regulatory credits, compressed automotive gross margins (ex-credits) to 16.3%.”
Strong demand is the biggest bullish takeaway from the quarter, as inventory improved, falling to 15 days of supply from 27.
Related: 3 Tesla shareholders speak out after mixed Q2 earnings
