Top 2 Earnings Surprises Wall Street Never Saw Coming — Time to Buy or Sell?

Top 2 Earnings Surprises Wall Street Never Saw Coming — Time to Buy or Sell? Fahad Saleem Fri, July 31, 2026 at 6:25 PM GMT+2 4 min read GM TSLA For this article, we define a surprise as a company reporting earnings or revenue that moves in the opposite direction from Wall Street's year-over-year expectations. Tesla (NASDAQ:TSLA) second-quarter earnings unexpectedly fell year over year while Wall Street was expecting growth.

The stock is down 30% so far this year. Time to buy the dip? The surprise: Wall Street expected profit to climb.

It didn't. Operating margin fell from 4. 1% a year ago to 1.

41% this quarter. Free cash flow went negative for the first time in two years, even with cars selling out of inventory. The bull case: Tesla (NASDAQ:TSLA) ended quarter with $43.

5 billion in cash and its largest order backlog since 2023. Trailing-twelve-month revenue passed $100 billion for the first time ever. The energy division deployed 13.

5 GWh of storage, its second-best quarter on record. Robotaxi is now running in 7 U. S.

markets, and service margins hit an all-time high of 14. 1%. The bear case: 2026 CapEx guidance tops $25 billion, nearly triple last year's $8.

5 billion, and Tesla is lining up another $30 billion in debt to cover it. Auto gross margin slipped from 19. 2% to 16.

3% in a single quarter. Energy margin fell even harder, from 39. 5% to 20.

4%. Overseas, BYD doubled its EU market share and pulled even with Tesla, while Rivian's R2 chips away at U. S.

share and Chinese automakers own the home turf. The stock's PEG ratio sits at 4. 72.

Forward P/E is above 170x. Buy or sell?   Tesla (NASDAQ:TSLA) is spending record sums on businesses that haven't proven themselves yet, while the car business it's known for keeps losing pricing power.

If you believe in the robotaxi and Optimus story, this looks like a cheap entry. If you need earnings growth to justify the price tag, the case isn't there yet. General Motors Co (NYSE: GM) recently posted earnings and surprised Wall Street on revenue.

Analysts had expected a slight drop. Instead, GM's revenue rose. But is the stock a long-term buy for investors?

Let's analyze. General Motors Co (NYSE: GM) sold fewer cars and still made more money. U.

S. unit sales fell 4%, but revenue went up anyway. The average GM vehicle sold for about $52,000 during the quarter, and that's the reason.

Higher prices, not more volume, drove the surprise. The bull case: Trucks and SUVs are carrying GM right now. The company has over 4% of the U.

S. full-size pickup market. GM's OnStar and Super Cruise are turning into a real second business too.

Deferred revenue is up about 50% year over year, subscribers are near 13 million, and GM expects double-digit growth here through 2027. Jefferies raised its price target to $99 after the earnings print and now sees 2027 EPS reaching $16. Story Continues The bear case: GAAP net income attributable to shareholders fell 31% year over year, even as adjusted earnings jumped.

The company has taken about $11 billion in EV-related charges since late 2025. Management says the worst is over, but another surprise charge would undercut that quickly. GM is also losing ground overseas.

Market share slipped in China and across Asia-Pacific, and Chinese automakers keep taking share in markets GM can't fully protect. Buy or sell?   General Motors Co (NYSE: GM) is making more money while selling fewer cars, and its software business is becoming a real second profit stream.

But GAAP earnings still lag the adjusted numbers everyone's citing, and China remains a slow bleed. For investors who can handle a cyclical, capital-heavy stock trading at a steep discount, this still looks like a buy. Anyone uneasy about auto cycles or China exposure might want to wait for a cleaner quarter.

While we acknowledge the risk and potential of TSLA and GM as an investment, our conviction lies in the belief that some AI  stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSLA or GM and that has 10,000% upside potential, check out our report about the cheapest AI stock . READ NEXT:  33 Stocks That Should Double in 3 Years  and  Cathie Wood 2026 Portfolio: 10 Best Stocks to Buy .

  Disclosure: None.   Follow Insider Monkey on Google News .