Tesla Motors Inc (NASDAQ:TSLA) reported better-than-expected earnings results for the first quarter, but the electric car manufacturer’s outlook for the second quarter disappointed some investors.

As a result, the stock price of the company closed at $201.35 per share, down by more the 2%. The stock declined further by more than 7% to $186 per share during the extended hours trading on Wednesday.

Financial results

During the first quarter, Tesla Motors Inc (NASDAQ:TSLA) posted Non-GAAP net income of $17 million or $0.12 earnings per share compared with the $0.07 earnings per share expected by analysts polled by Bloomberg.

The electric car manufacturer’s non-GAAP revenue increased 27% to $713 million. Tesla Motors Inc (NASDAQ:TSLA) said its non-GAAP automotive margin was 25.5%, a 20 basis points improvement sequentially despite booking an unplanned $2 million reserve for underbody shield retrofits. According to the company, the average selling price of its Model S vehicle remained strong.

Tesla Motors Inc (NASDAQ:TSLA) said its expenses for Research & Development (R&D) were $68 million on Non-GAAP basis, an increase of 17% from the previous quarter because its engineering work for the Model X vehicle was accelerated and it continued its efforts to adapt Model S for growing international markets.

The electric car manufacturer said its selling, general, and administrative (SG&A) expenses rose 11% sequentially on Non-GAAP basis primarily due to the expansion of its customer support infrastructure.

Tesla Motors Inc (NASDAQ:TSLA) generated $61 million cash flow from operations, and it has $2.6 billion in cash, cash equivalents, and short-term marketable securities by the end of the first quarter.

In terms of deliveries, Tesla Motors Inc (NASDAQ:TSLA) delivered 6,547 Model S vehicles compared with its 4,900 Model S deliveries in the same period a year ago. The number of its deliveries beat the average estimate of analysts surveyed by Bloomberg, but it was lower than the highest estimate of 6,600 units.

Andrea James, an equity analyst at Dougherty & Co. opined that the deliveries of the electric car manufacturer “beat, but not by as much as people expected them to beat.” He added, “Overall these look like good results at a first glance.”

Second quarter outlook

For the second quarter, Tesla Motors Inc (NASDAQ:TSLA) forecasted that it will deliver 7,500 Model S vehicles, and plans to produce around 8,500 to 9,000 vehicles. The company said battery cell supply will still constrain production for the quarter, but expects to improve in the third quarter.  It also expects to lease only around 200 cars during the quarter under its leasing program due to lead times between vehicle orders and deliveries.

Tesla Motors Inc. (NASDAQ:TSLA) expected that its non-GAAP gross margin will slightly increase. Its operating expenses are expected to climb by approximately 30% for R&D and 15% for SG&A during the second quarter.

The company plans to invest around $650 million to $850 million in capital expenditures for increased production capacity, growing its store, service center, supercharger footprints, Model S and Model X development, and starting the construction of its gigafactor

Tesla also said battery cell supply will still constrain company vehicle production in the second quarter but that situation should improve in the third quarter.

Efraim Levy, an analyst at Capital IQ said the outlook of Tesla Motors Inc (NASDAQ:TSLA) was disappointing as investors are looking for something better.