The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.

Though Tesla (TSLA) stock is lower following the release of its first quarter earnings report, Wall Street analysts are generally encouraged, though cautious.

Tesla’s larger-than-expected $25 billion capital expenditures guide caught many off guard, as it was more than investors expected.

“TSLA would be moving higher after-hours, instead of trading sideways, if not for a $5B increase in the 2026 capex outlook,” Piper Sandler analyst Alexander Potter wrote on Wednesday night. “The previous outlook (of $20B) was already around 2x higher than Tesla's previous peak, and the new outlook (of $25B) illuminates the scale of Tesla's ambition. Since Q1 capex was only $2.49B, Tesla's updated guidance implies strongly negative free cash flow for the rest of 2026.”

Potter added that on the plus side, Tesla’s AI investments are “bearing fruit,” with Full Self-Driving (FSD) subscriptions in particular jumping. Potter reiterated his Overweight rating and $500 price target.

Morgan Stanley’s Andrew Percoco echoed the sentiments regarding capital expenditures, but added that the short-term pain is worth it for Tesla’s long-term prospects.

“Tesla is entering a phase of materially higher capex as it expands its manufacturing footprint across energy, autos, and semiconductors, while also investing heavily in compute and next-generation physical AI infrastructure (robotaxi and humanoids),” Percoco wrote early Thursday, adding that the bank reiterates its Equal Weight rating and $415 price target. “We view this investment cycle as necessary to establish a durable leadership position in autonomy and physical AI, and remain confident in Tesla’s long-term trajectory.”

Percoco added that Tesla’s robotaxi rollout, implementing a “slow and steady” approach, is the right way to go, despite being slower than investors expect. Accumulating NHTSA data that tracks safety metrics of the robotaxi fleet versus rival Waymo’s progress in its early stages will be key, he said.

Caution was the name of the game post-earnings for William Blair’s Jed Dorsheimer as well. An “abundance of caution” approach to robotaxi expansion is commendable, he said, as a high-profile incident or crash would be a huge backward step for Tesla, and the policy landscape would tilt against it.

Dorsheimer was also on board with Tesla and CEO Elon Musk’s cautious approach to Optimus robots.

“Optimus V3 was supposed to debut in April, but Musk pushed that back until production start because competitors analyze and copy. The production start is slated for July/August, but the ramp-up is “literally impossible to predict,” he said. “To Musk’s credit, fully disassembling a vehicle line and standing up a completely new product line in a few months is a herculean task.”

Tesla said in its Q1 earnings report that preparations for the company’s first large-scale Optimus factory “will begin shortly in Q2.”

The first-generation production line will be located at Tesla’s Fremont plant, where the Model S and Model X assembly lines will be converted for Optimus production. Tesla said this line could potentially produce 1 million robots per year, which seems like the kind of lofty target Musk is known for making.

Dorsheimer maintained his Market Perform rating on the stock.

Tesla uber-bull Dan Ives of Wedbush acknowledged the capex increase but said it was a “good (not a bad) thing” as the company pushed forward with its physical AI endeavors, including unsupervised FSD and robotaxi services.

“FSD paid subscribers reached nearly 1.3 million globally, up from 1.1 million in the prior quarter, as TSLA’s evolved GTM [go to market] positions FSD as the primary product and the vehicle as the delivery mechanism,” Ives wrote in a note published Thursday morning. Ives added, “Unsupervised FSD release is guided to 4Q26 with TSLA targeting roughly a dozen US states for unsupervised FSD/Robotaxi by year-end and material recurring revenue contribution expected in 2027. Tesla is morphing into a physical AI stalwart..the path is here and it requires more CapEx.”

Ives maintained his Outperform rating and street high $600 price target.

Pras Subramanian is Lead Auto Reporter for Yahoo Finance. You can follow him on X and on Instagram.

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance