Tesla's (TSLA) aggressive price reduction strategy hurt the company’s profitability in the seco🌱nd quarter of the year, despite record revenue and deliveries. Tesla shares fell about 4ღ% in extended trading, as Elon Musk reiterated his stance of "sacrificing margins" to drum up sales volume.

Price Cuts Eat Into Tesla Pro🀅fits But Musk Unfa⛄zed

Tesla's second quarter operating margins were 9.6% lower compared to the same period last year due to the company's 澳洲幸运5官方开奖结果体彩网:price-cut strategy. And Musk remains unfazed.

“It does make sense to sacrifice margins in favor of making more vehicles because we think in the not too distant future they will have a dramatic valuation increase," he said during the earnings call Thursday.

Some analysts agree. "Tesla is seeing steady demand post price cuts in the U.S. and China with margins now in stabilization mode that should bottom over the next 1-2 quarters," wrote analysts at Wedbush Securities in their post-earnings note.

Following the company's 澳洲幸运5官方开奖结果体彩网:record deliveries, powered by a sales surge in China, Tesla was able to report automotive revenues that were $275 million more than the previous quarter, but 46% higher year-on-year.

A services revenue boost of around $300 million helped to bump up the overall figure. However, free cash flow of $1.01 billion, trailed estimates of $2.18 billion. Despite the lower cash flow, the company still added $700 million to its cash pile of $23 billion.

$1 Billion AI Investment

Musk expects to spend more than a billion dollars by the end of next year on Tesla's Dojo Supercomputers that will be used to train its driverless cars.

Real world data, neural net training, vehicle hardware, and software are four pillars of self-driving technology, according to Tesla, which currently works with an Nvidia (NVDA) supercomputer for the training aspect.

Musk said Tesla will continue to work with Nvidia, 🅘while the Dojo supercomputer that will focus on video training helps cut training costs.

Road Ahead May Be Bumpy

However, some analysts are concerned about the company's performance for the rest of the year. The latest earnings cited higher operating costs as the company moves ahead with Cybertruck deliveries, which it states are on course for this year. There was also a sharp drop in regulatory credits which were $282 million, versus $521 million in the first quarter.

Investment bank Goldman Sachs down🌟graded Tesla stock at the end of the second quarter, with analyst John Delaney citing the stock’s rally and a difficult pricing environment.

"Overall we believe our view that Tesla is well positioned for long-term growth, given its leading position in the EV and clean energy markets (which we attribute in part to its ability to offer full solutions including charging, storage, software/FSD, and services with a direct sales model), is now better reflected in the stock," Delaney said.

Tesla's stock price has rallied 136% in 2023, outperforming the S&P 500 Consumer Discretionary sector, which has returned about 38% over the same period.