Tesla (TSLA) shares slid 4% in Thursday morning trading to near $370 after the company posted Q1 2026 earnings and revenue beats, but investors focused on an aggressive capital expenditure ramp and a tempered near-term autonomous driving outlook. Capital expenditures surged 67% year over year to $2.493 billion for AI compute and autonomous vehicle development, while operating expenses climbed 37% year over year, with R&D at $1.95 billion. Truist Securities noted that despite the earnings beat, the capex increase is expected to lead to negative free cash flow this year. On autonomy, CEO Elon Musk acknowledged that millions of Tesla vehicles built with older "Hardware 3" lack necessary components for full autonomy despite customers paying for the capability. The quarter showed active FSD subscriptions reached 1.28 million, up 51% year over year, and services revenue grew 42% to $3.745 billion. Tesla also launched unsupervised Robotaxi rides in Dallas and Houston and completed the tape-out of its AI5 inference processor in April. Automotive gross margin expanded to 21% from 16% a year ago, and free cash flow rose 117%. Tesla closed at $387.51 on Wednesday and is down 17% year to date.