Tesla missed Wall Street’s profit expectations, even after a strong quarter for car sales, in a setback for the electric-vehicle maker as it looks to build new lines of business in robotics, autonomous driving and AI.Adjusted earnings were 33 cents a share in the second quarter, the company said on Wednesday in a statement. That was well short of the 51-cent average of analyst estimates compiled by Bloomberg.Tesla also reported its first quarter of negative free cash flow in more than two years, burning through $1.09 billion.Tesla chief executive Elon Musk has warned spending this year will total more than $25 billion, and the company is looking to increase production of cars, batteries and robots across half a dozen plants as it follows his futuristic vision. The effect of that investment is now showing in the company’s financials.Tesla reported capital expenditure of $5.8 billion in the quarter. At that pace, Tesla would spend about $17 billion this year – well below the company’s target. This puts the EV maker in a bind as it tries to hit the ambitious goals it has promised to investors.“Tesla is one of the few companies that should be spending more on AI. Spending less for them is puzzling given how much their future is anchored on AI adoption into every part of their business,” said Max Gokhman, head of AI and digital asset solutions at Franklin Templeton.Tesla shares fell 2.8 per cent after the closing bell. The stock has declined 17 per cent so far this year up to Wednesday’s close.A fleet of Tesla Cybertrucks at charging stations outside the SpaceX launch production centre at Starbase, Texas. ReutersInfoProfit was affected by lower average vehicle selling prices as the company offered incentives to attract buyers. Tesla also phased out the S and X models — two of its highest-priced cars. Operating costs surged 47 per cent to $4.35 billion.Tesla also reported a decline in revenue from regulatory credits, which are payments it receives from other car makers that exceed emissions standards. That revenue stream has decreased as US President Donald Trump backs away from clean-energy goals laid out under his predecessor, Joe Biden.Revenue was $28.2 billion for the quarter, beating market expectations. Earlier this month, Tesla reported it sold more than 480,000 vehicles in the second quarter, which was well above expectations. Cars remain Tesla’s most important business, while robotaxis and other projects are still not generating meaningful revenue.“Tesla delivered its best-ever second quarter and first genuine revenue growth in over a year, yet the market keyed on a sharp profit miss,” Ivan Feinseth, an analyst with Tigress Financial Partners, said in a note. While car sales surged during the period, “that volume was bought with steep discounts, so profitability compressed".Subscriptions for full self-driving software rose to nearly 1.5 million, an increase of 56 per cent from a year earlier and a continuation of an upward trend.The EV maker did not disclose new information about its robotaxi ride-hailing business, which recently expanded to Miami, Orlando and Tampa after being launched in Texas cities. Tesla also offers a rideshare service under the same app in the San Francisco Bay Area, but it is more similar to Uber and Lyft.SpaceX had a record-setting public offering in the quarter. ReutersInfoThe quarter included a significant milestone for another major Musk-run company when SpaceX went public in a record-setting offering. The rocket-launch company raised tens of billions of dollars in the process on a wave of investor optimism, turning Mr Musk into the world’s first trillionaire, albeit briefly. SpaceX shares have declined in recent weeks, pulling his wealth down.There has been widespread speculation among investors that Tesla and SpaceX could merge in the near future thanks to shared ambitions in artificial intelligence. The release did not address the topic, but investors will be listening for any comments by Mr Musk on the earnings conference call.