July 2 (Reuters) - Tesla beat Wall Street expectations for second-quarter car deliveries, announcing a record high for the period on Thursday, boosted by a recovery in demand in Europe that offset continued weakness in the North American market.

These strong results indicate that Tesla’s core automotive business is regaining momentum after two consecutive years of declining annual sales, providing the company with the financial margin to support its ambitions in self-driving and artificial intelligence, which are the main drivers of its market value of around $1.6 trillion.

Tesla expects to increase capital expenditures by more than $25 billion in 2026, nearly triple last year’s level of $8.5 billion, with the goal of expanding its artificial intelligence infrastructure, increasing battery production, manufacturing CyberCab vehicles, and developing Optimus robots.

Seth Goldstein, senior equity analyst at Morningstar, said, "I think strong growth in Europe is the main driver for Tesla right now. Sales in the US still appear to be low, although the decline is less severe than the broader contraction in the US electric vehicle market, while China is registering limited growth."

Tesla's recovery in Europe was aided by factors including government incentives for purchasing electric vehicles, the accelerating pace of electrification in corporate fleets, rising fuel prices, and a decline in negative consumer reactions to CEO Elon Musk's far-right political stances that sparked widespread controversy last year.

Visible Alpha data showed that Tesla delivered 480,126 vehicles from April to June, a record high for the second quarter of the year and an increase of about 25 percent over the same period last year, far exceeding the average analyst forecast of 402,776 vehicles.

The company produced 451,758 vehicles during the quarter, meaning that deliveries exceeded production by more than 28,000 vehicles, which led to a reduction in the inventories that had accumulated during the first quarter.

Tesla's sales of electric cars manufactured in China have risen this year, boosted by the start of production of the updated version of the Model Y, despite fierce competition from BYD and other local car manufacturers.

Shares of Tesla, based in Austin, Texas, fell by about two percent on Thursday, after posting gains of 12 percent since the start of the week.

The company said it will announce its quarterly results on July 22 after the markets close.

Analysts noted that much of the optimism was already reflected in the stock price after it rose ahead of the quarterly deliveries report, resulting in a limited reaction from investors following the release of the data on Thursday.