Tesla's energy storage business shipped 13.5 GWh of batteries in Q2 2026, the company disclosed in its quarterly earnings report on Wednesday — a record that grew more than 40 percent year-over-year and now outpaces Tesla's vehicle delivery growth for the second straight quarter. The milestone cements energy storage as Tesla's fastest-growing segment, even as the carmaker's overall profit fell sharply on a collapse in regulatory credit revenue.
The 13.5-GWh figure covers both utility-scale Megapacks and home-storage Powerwalls. Tesla's total storage deployments have now more than doubled since 2023, fueled by the ramp-up of its 40-GWh Megapack factory in Lathrop, California and a second factory under construction in Shanghai. The Lathrop plant, which Tesla described in its investor letter as "the first of many," reached volume production in late 2025 and feeds a global pipeline that, according to energy research firm Wood Mackenzie, could see 60 GW of grid-scale storage built in the US alone between 2023 and 2027.
Energy Storage Outpaces Vehicle Growth
Tesla's vehicle deliveries hit 480,126 units in Q2, up 25 percent year-over-year and a record second quarter. But storage grew almost twice as fast. The divergence is not new — energy storage has grown faster than automotive in six of the last eight quarters — but Q2 marked the first time that storage's absolute contribution to revenue began to matter. Combined solar and storage revenue reached an undisclosed figure within Tesla's $28.24 billion total, which beat Wall Street expectations of roughly $26.4 billion.
"Stationary storage is now a market worthy of dedicated and specially designed products produced at the gigawatt-hour scale," Dan Finn-Foley, an energy storage expert at PA Consulting, said in response to Tesla's numbers. The Inflation Reduction Act, which expanded investment tax credits for standalone storage in 2024, has supercharged utility procurement. US interconnection queues now hold 680 GW of storage capacity at the end of 2025, according to Lawrence Berkeley National Lab data cited in the shareholder deck.
The global picture is similar. BloombergNEF estimates that annual grid-scale battery additions will reach 120 GW by 2028, up from roughly 45 GW in 2025. China leads in absolute deployments, but the US and Europe are growing faster on a percentage basis. Tesla's Lathrop factory alone can supply about a third of current US demand, and the planned Shanghai Megapack plant will serve Asia-Pacific markets where utility-scale procurement has accelerated since 2025.
The Profit Squeeze Hiding Behind the Record
The headline storage number is a bright spot in a mixed quarter. Tesla posted record revenue of $28.24 billion, up 26 percent from a year ago, but non-GAAP earnings of $0.33 per share missed the $0.53 analysts expected and fell 18 percent year-over-year. Operating income dropped 57 percent to $398 million, and operating margin sank to 1.4 percent from 4.1 percent.
The main culprit was regulatory credits. Tesla booked just $146 million in credit sales in Q2, down 67 percent from $439 million a year ago and the lowest figure in years. Credits cost Tesla almost nothing to produce, so every dollar of credit revenue falls straight to profit. The collapse follows the September 2025 expiration of the $7,500 federal EV tax credit and a change in federal rules that eliminated the penalties automakers previously paid for missing fuel-economy targets — the main reason rivals bought Tesla's credits in the first place.
Tesla's response has been to lean harder on energy storage and services revenue. The company's services segment, which includes charging, insurance, and maintenance, grew 50 percent year-over-year. Combined with storage, these two segments now account for roughly 15 percent of Tesla's total revenue, up from about 10 percent two years ago. But they are not enough to offset a 47 percent jump in operating expenses, which hit $4.35 billion as Tesla spent on AI infrastructure, the Optimus robot program, and robotaxi development.
Battery Supply Chain Moves In-House
The storage boom is also reshaping Tesla's approach to the battery supply chain. The company announced in May that it would break ground on a lithium refinery near Corpus Christi, Texas — its first move into upstream processing. CEO Elon Musk said on the earnings call that "the chokepoint is much more on refining capacity than it is on mining," and predicted Tesla would become the largest lithium refiner in North America.
Musk also acknowledged that Tesla would prefer not to run a refinery at all. He pleaded with other companies to enter the space, saying the company was "begging" for partners. But with lithium prices still elevated — the metal has fallen about 30 percent from its 2022 peak but remains well above historic averages — and global EV and storage demand growing faster than refining capacity, Tesla judged vertical integration unavoidable.
The company is also expanding cathode production at its Austin, Texas facility and has pushed its 4680 cell program deeper into production at multiple sites. The 4680 format, which Tesla says offers five times the energy of its older 2170 cells, is now used in Cybertruck and a growing share of Texas-made Model Y vehicles, though the company has not disclosed 4680 yields in recent quarters.
What the Storage Boom Means for Grid Operators
Tesla's record quarters are part of a broader reality check for grid planners. California's grid operator, CAISO, saw battery storage become the single largest source of power supply for several hours after sunset on multiple evenings in 2025, a first for any US grid. The trend is spreading: ERCOT in Texas, which added more than 10 GW of battery storage in 2024-2025, now routinely dispatches batteries to cover evening demand peaks as solar generation fades.
"The storage gold rush is real," said Finn-Foley. But he cautioned that the pace of deployment is creating new challenges, including queue backlogs at interconnection points, transformer shortages, and a shortage of experienced battery project engineers. Wood Mackenzie projects 60 GW of new US grid storage through 2027, but warns that supply chain bottlenecks in power electronics and medium-voltage transformers could delay up to 15 percent of those projects.
Tesla's Megapack is the market leader in the US utility-scale segment, followed by Fluence and BYD. The product's chief advantage is its factory-integrated design, which ships as a complete, pre-assembled unit rather than a kit of components assembled on site. That cuts installation time from months to weeks and reduces the risk of commissioning delays — a growing concern as more projects compete for limited engineering talent.
For more on battery technology and energy storage trends, check out our Battery Tech coverage. According to Tesla's Q2 2026 shareholder letter, the company expects storage deployments to exceed 60 GWh for the full year 2026, which would represent roughly 40 percent growth over the estimated 43 GWh shipped in 2025.