Meta Earnings Miss Expectations as Massive AI Investment Drains Cash Flow by 91%

The ceiling for shares of Meta is lower after its earnings report, analysts say

Wall Street analysts lowered their outlooks for Meta Platforms as investors send the stock lower on fears its capital expenditures on artificial intelligence won't yield as strong of a return on investment. Meta's stock dropped 9% in premarket trading Thursday following its second quarter earnings report , which revealed an earnings miss for the hyperscaler. The company reported earnings of $6.18 per share compared to analysts polled by LSEG's estimate for $7.22. While Meta beat on revenue, its guidance on the metric for the current quarter also came in below estimates. The number of active users across Meta's suite of apps also missed, coming in at 3.6 billion. The company's forecast for its capital expenditures for the year narrowed to between $130 billion to $145 billion. Meta previously expected $125 billion on the low end of the range. That spending has led the Mark Zuckerberg-led company's free cash flow to fall to $784 million, down from $8.55 billion a year ago. "Meta shares are down," wrote TD Cowen analyst John Blackledge in a Thursday note, "likely reflecting the slight 3Q rev miss (at midpoint) alongside questions about timing / scaling of AI monetization amid massive capex cycle." JPMorgan analyst Doug Anmuth said monetizing the company's spending on artificial intelligence beyond advertising appears limited. While investors were gaining confidence in the last few weeks about the company's AI strategy -- through its first proprietary foundation AI model Muse Spark -- Anmuth wrote in a Thursday note that there wasn't much clarity provided. "We did not come away learning much incremental on the developer API, consumer/business agents, or potential plans to directly monetize compute," Anmuth said. Firms across the street broadly lowered price targets, but none downgraded the stock on worries. That's because, according to Deutsche Bank Analyst Benjamin Black, the fundamentals of the company are still strong. "Meta's 2Q26 results were optically messy, but the underlying business and outlook were considerably stronger than the initial stock reaction suggests," Black wrote in a Thursday note. "The larger takeaway is that Meta's core business has the momentum and earnings power to support its expanding AI ambitions." JPMorgan: Neutral, $640 The bank's price target, down from $725, indicates a 9% gain from Wednesday's close. "We expect Meta to continue to invest heavily N-T & we now project 2027 capex of $243B (+70% Y/Y), while our top-line estimates remain largely unchanged, thereby putting greater pressure on FCF. Overall, we remain encouraged by Meta's continued headroom in core ranking & recommendation improvements, model progression, & potential new forms of AI monetization, but we still need greater clarity on the product pipeline & spending outlook." Wells Fargo: Overweight, $640 The bank's price target is down from $835. "Amid broad uncertainty on the hyperscaler investment cycle, Meta incremental ROI case remains the most opaque. Mgmt commentary suggests seeking flexibility in build beyond '27 & less appetite for NT capacity sales. Cutting ests & target, remain OW." Cantor Fitzgerald: Overweight, $680 The firm's price target, down from $770, represents a 16% gain from Wednesday's close. "Overall, there was a lot to like in META's 2Q print. That said, debates on the company's ability to achieve compelling returns in the M-LT from ongoing capex investments are likely to remain open until we see revenue growth potentially re-accelerate." DA Davidson: Buy, $700 The firm's price target, down from $850, indicates a 19% gain from Wednesday's close. "META plans to maximize compute capacity in 2026 and 2027 with near term capacity viewed as more valuable than long-term capacity. Management underscored the past value of its incremental capacity and maintains confidence in its ability to utilize capacity to serve AI products longer term. Looking out to 2028 and beyond META believes it capacity strategy will enable continued growth in compute while noting the extended duration of data center assets provides inherent flexibility to adjust the pace of investment that aligns with the pace of AI adoption." UBS: Buy, $715 The bank's price target, down from $766, implies a 22% gain from Wednesday's close. "We have left our 2026-2028E revenue largely unchanged post print so this would be upside to our estimates as well. Given Meta formally stated that the contingency plan remains to sell excess compute / model access to external vendors - it would be hard to see a scenario where revenue does not benefit from investments at all." TD Cowen: Buy, $750 The bank's price target, down from $800, represents a 28% gain from Wednesday's close. "Mgmt. raised the lower end of its capex guide by $5BN to $130BN-$145BN, citing focus on maximizing '26 and '27 compute capacity. The outlook implies 97% y/y spend growth at midpoint, vs our & cons. pre-print ests of $135BN (+92% y/y). Mgmt. called out ability to monetize their infrastructure via i) business agent & other agentic tools, ii) API access to Meta's models, and iii) direct monetization of infrastructure, for which mgmt. cited 3p offers to monetize their compute at a meaningful premium to their building costs, noting that 'there is nowhere near enough compute for all the demand.'" Deutsche Bank: Buy, $750 The bank's price target is down from $800. "AI continues to drive measurable gains across engagement, advertising performance and creative, while the company is opening new revenue streams across Business Agents, paid messaging, subscriptions, APIs and enterprise products. Meta still has considerable runway to improve ranking and recommendations, supporting both ad inventory and pricing." Morgan Stanley: Overweight, $775 "META's core leading social platform continues to become stronger, with 3.6bn daily active users across Family of Apps and 2bn DAUs on Instagram. Engagement trends and META's ability to serve more relevant organic and paid content are only improving." Barclays: Overweight, $780 The bank's price target, down from $830, indicates a 33% gain from Wednesday's close. "META's ads business continues to defy gravity, growing 26% ex-fx in 2Q (10 points above Google) and gaining more dollar share on the field. The 3Q guidance suggests much of the ad momentum continues into 2H despite the tough comps... the call sounded very broad while the reality is likely more narrowly focused to what exists in the four mega apps at META, but the strategy and business model expansion seemed almost peanut-butter-manifesto-esque. There are already well-resourced and established competitors in many of these new enterprise AI areas." Citi: Buy, $800 The bank's price target, down from $800, implies a 36% gain from Wednesday's close. "We believe Meta's LLMs are beginning to deliver durable engagement gains on continued R & R improvements and we note global time spent on IG rose DD in 2Q. And with 1M+ businesses using Business Agent, 9M+ SMBs using Meta's AI creative tools, as newer apps launch and Meta's subscription offering ramps, we believe there is increasing clarity on Meta's product roadmap, and we await details of Meta's Enterprise offering." Bank of America: Buy, $810 The bank's price target, down from $835, represents a 38% gain from Wednesday's close. "Recent capacity deals suggest AI capacity is very valuable, Meta should have significant capacity optionality as its data centers ramp over the next 12 months, and we think current valuation reflects little to negative value for Meta's growing capacity assets. At AH price $542, Meta is valued at 16x our '27E EPS (and just 13x for Family of Apps), and we see favorable risk/reward with potential for upcoming product launches and capacity deals to raise 2027 rev,/EPS expectations." Evercore ISI: Outperform, $820 The bank's price target, down from $930, indicates a 40% gain from Wednesday's close. "Despite very solid core P & L results, META traded off due to: 1) a lack of forward clarity on '27 CapEx, where mgmt. declined to provide color beyond the CFO's comments about gearing plans to "maximize" 2026-27 capacity - sounds open-ended; 2) no material update on frontier-model progress, with mgmt. offering only qualitative color that "larger and more advanced models" are still being scaled; 3) commentary about prioritizing selling intelligence over compute (despite fielding offers at a "significant premium" to cost), deferring a nearer-term, more visible revenue / FCF offset to the CapEx build in favor of longer-dated, less-certain monetization; and 4) lack of other, non-advertising monetization proof points." Canaccord Genuity: Buy, $930 "Investors remain focused on the spending trajectory even as the core business continues to see strong momentum. With AI execution intact across the platform and new revenue streams beginning to take shape, we see the market's focus on spend and a softer near-term guide as an entry point rather than a change in our thesis."

Meta reports second-quarter results after the close

Meta is scheduled to report second-quarter results after the close of regular trading on Wednesday. Here's what Wall Street is expecting, according to estimates from analysts polled by LSEG: * Earnings per share: $7.22 adjusted * Revenue: $60.17 billion Meta is projected to show revenue growth of 26% from $47.52 billion in the same period a year ago, as the company's core advertising business continues to benefit from advancements in artificial intelligence. While Meta's digital ad business remains healthy, the company is trying to show that it can compete directly in the market for AI models and services, where OpenAI, Anthropic and Google have big leads. On the earnings call, investors will be listening closely to what Meta CEO Mark Zuckerberg has to say about the company's efforts to more directly monetize its various AI-related efforts. Earlier this month, Meta debuted the Muse Spark 1.1 model, which AI chief Alexandr Wang said represents the "strongest model for agentic and coding work yet" and at a cheaper price than offerings from OpenAI and Anthropic. Meta also released Muse Image, which contains certain features that power users and creators can access if they sign up for one of the company's new monthly subscription plans that were revealed in May. The company has been aggressively investing in a new AI strategy since hiring Wang in June 2025 in a deal that involved a $14.3 billion investment in Scale AI, Wang's startup. Meanwhile, Meta is pouring money into AI infrastructure as it tries to keep pace with Alphabet, Amazon and Microsoft when it comes to building data centers and securing AI chips and systems needed to run models and workloads. On Tuesday, Meta announced a venture with BlackRock to create a $14 billion data center project in El Paso, Texas, just a few weeks after disclosing that its big Hyperion data center project in rural Louisiana would cost over $50 billion. Earlier in July, Meta revealed plans to build a $9 billion data center in Alberta, Canada. Meta shares are down 10% this year, badly trailing the Nasdaq, as Wall Street questions whether the company's hefty investments will produce returns. "The gap between capex intensity and diversified monetization remains the central debate for the stock," analysts at Wedbush wrote in a report last week. They have the equivalent of a hold rating on the shares and said the uncertainty is "the reason we remain on the sidelines despite Meta's valuation discount to peers." In its last earnings report in April, Meta boosted its capex forecast for the year to a high of $145 billion from $135 billion. Analysts expect Meta to post $33.9 billion in capex for the second quarter and are projecting $136.7 billion for the year. Alphabet shares sank last week after the company hiked its guidance for 2026 capex to as much as $205 billion from a prior prediction of up to $190 billion. Among the four leading hyperscalers, Meta is the only one without a cloud infrastructure business. But Zuckerberg has indicated recently that the company will be looking to sell some AI capacity to third parties. Anthropic is currently engaged in preliminary talks to lease AI-related computing capacity from Meta, CNBC confirmed earlier this month. For the second quarter, Meta is expected to report 3.61 billion daily active people (DAP), according to StreetAccount, a number that refers to usage of its family of apps. Analysts anticipate second-quarter average revenue per person of $16.65. Meta's Reality Labs unit, which develops virtual reality, augmented reality and AI-powered wearable devices like the Ray-Ban Meta glasses, is expected to post a loss for the quarter of $5.07 billion on revenue of $423.4 million, according to StreetAccount.

Mark Zuckerberg's Pivot to AI Is Blowing Up in His Face Spectacularly

Can't-miss innovations from the bleeding edge of science and tech Despite having almost nothing to show from his enormous spending on AI, Meta CEO Mark Zuckerberg is doubling down. Earlier this week, the social media company announced during its second quarter earnings call that it was raising capital expenditures from $125 billion to at least $130 billion, a clear sign that it's not taking its foot off the pedal. Yet amid renewed concerns that the tech industry may be nearing the edge of a cliff thanks to its obsession with building out enormously expensive data centers without a clear path to profitability, investors sent back a clear signal in return. Meta's shares nosedived following its announcement, plummeting over 11 percent over the last five days alone. According to Zuckerberg, all that extra AI spending was "accelerating every part of our core business." He also claimed that some of the tech would be sold off to other businesses. But whether the company will have anything compelling to offer them remains dubious at best. Meta has been burning through its funds at an alarming rate. Even strong revenue numbers -- a 28 percent increase this latest quarter compared to the same period last year -- couldn't stem the bleeding, with free cash flow sinking to the lowest level in at least five years thanks to AI spending. Despite committing well over $100 billion to the tech, Meta has been practically absent from the frontier AI model race. Its so-called Superintelligence Lab has turned into a "soul-crushing gulag" plagued with rock-bottom morale -- and most importantly, it's not getting results. Its efforts to develop an in-house frontier model, dubbed Muse Spark, have been mired by setbacks, with Meta continuously shifting back the timeline of its release to developers. On July 11, the company released version 1.1 of its AI to little fanfare, with Axios noting that it's still easily outdone in most tasks by competing models from OpenAI, Anthropic, and Google. At the same time, Meta released an image-generation model called Muse Image, which felt like an afterthought and a too-little-too-late attempt to catch up with its competitors. The latest news has given some analysts a feeling of déjà vu. Zuckerberg has garnered a reputation for making major strategic missteps since long before AI. Case in point was the company's heavily criticized pivot to the "metaverse," an ill-fated attempt to sell customers on the idea of spending their workday inside a hollow and cartoonish virtual reality world, which feels like the perfect precursor to Meta's current pains. "There's a bit of similarity to Meta's metaverse missteps in that Meta is once again spending ahead of proven product demand," Forrester analyst Mike Proulx told the BBC. Meanwhile, Meta's platforms have descended into a practically unrecognizable ocean of clickbait and AI slop, something the company has yet to meaningfully address as user numbers and engagement continue to slide. For his part, Zuckerberg remains infatuated by the concept of AI agents "that can work 24/7 on your behalf," as he told investors this week, and growing its Muse Spark model into a "large business for large businesses." But considering Meta is entering a game with much bigger players who've seen far more success in attracting customers and growing AI revenue so far, the company's long-term success is anything but guaranteed. And investors who've already shaken their heads after both Amazon and Google's parent company Alphabet announced major spikes in AI spending this month haven't taken kindly to Zuckerberg's lofty vision. Judging by how little the billionaire has to show, who can blame them? More on Meta: Is Mark Zuckerberg Actually TRYING to Destroy Meta?

Meta Q2 2026 earnings miss: legal charges, AI costs hurt profit

The social media company's net income fell 14% year over year as expenses surged 55%, and its free cash flow shrank to $784 million Meta $META Platforms reported second-quarter earnings of $6.18 per share on revenue of $60.80 billion, missing analyst expectations on the bottom line even as sales grew 28% year over year. Analysts had expected earnings of $7.22 per share on revenue of $60.17 billion, according to CNBC. Net income for the quarter came in at $15.85 billion, down from $18.34 billion in the year-ago period. Total costs and expenses reached $42.03 billion, a 55% increase from the prior year, a figure that included $2.40 billion in legal charges and $1.18 billion in severance expenses stemming from a round of layoffs that started in May, the company said. Free cash flow dropped to $784 million from $8.55 billion in the year-earlier quarter. The legal charges were recorded in general and administrative expenses. Meta said it is monitoring active legal and regulatory matters that could affect its business, and cited several youth-related social-media trials scheduled for later this year in the U.S. that may result in a material loss. According to CNBC, CFO Susan Li told analysts that stripping out the legal charges and severance costs, operating income would have been 9% higher than in the same quarter a year ago. Capital expenditures, including principal payments on finance leases, reached $31.08 billion for the quarter. The company lifted the floor of its full-year capital expenditure range by $5 billion to $130 billion, leaving the ceiling of $145 billion in place, the company said. Full-year total expenses are now expected to fall in the range of $165 billion to $169 billion. For the third quarter, Meta guided for revenue of $61 billion to $64 billion. Analysts had been expecting roughly $63.15 billion. Reality Labs recorded a $4.62 billion operating loss in the quarter, with the segment bringing in $431 million in revenue. The company's Family of Apps segment, which includes Facebook, Instagram, Messenger, and WhatsApp, generated $23.39 billion in operating income on revenue of $60.37 billion. Daily active people across Meta's family of apps averaged 3.60 billion in June, up 3% year over year. Ad impressions grew 14% and the average price per ad rose 12%. "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," Meta founder and CEO Mark Zuckerberg said in a statement. Meta stock fell around 10% in after-hours trading Wednesday.

Meta earnings reveal cash flow drops 91% -- while Zuckerberg writes op-eds about superintelligence | Fortune

The Facebook and Instagram parent company earned $15.85 billion, or $6.18 per share, in the April-June period. That's down 14% from $18.34 billion, or $7.14 per share, in the same period a year earlier. Revenue grew 28% to $60.8 billion from $47.52 billion. Analysts, on average, were expecting earnings of $7.19 per share on revenue of $60.22 billion, according to a poll by FactSet. "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," said CEO Mark Zuckerberg in a statement. "The results are already showing, and I'm optimistic about the potential ahead." Meta said the number of daily active users on its "family of apps" -- Facebook, Messenger, Instagram and WhatsApp and Threads -- grew 3% from a year earlier to $3.6 billion. Zuckerberg said Instagram reached the 2 billion daily users milestone during the quarter, while Threads has 500 million monthly active users. The Menlo Park, California-based company had 75,472 employees as of June 30, a decrease of 1% year-over-year. This still includes the roughly 8,000 workers the company said it would lay off. Meta said its third-quarter earnings report will have the updated figure. "Earnings come just as Meta pushes out an ad campaign and media blitz that aim to clarify Meta's stance and goals regarding AI. It's not surprising that Zuckerberg wants to come out with a more cohesive message around the company's AI ambitions, especially as Meta tries to carve out its own lane," said Emarketer analyst Minda Smiley. Zuckerberg wrote a glowing op-ed about AI's future in the Wall Street Journal on Tuesday, arguing that AI may soon deliver "personal superintelligence to everyone." But Smiley said the "optimistic, positive tone he's striking stands in stark contrast to the negative sentiment that's building toward social media companies over claims that they've harmed and addicted kids. This juxtaposition could make it more difficult for Meta to build credibility in an area where it's already a laggard." For the current quarter, Meta is forecasting revenue in the range of $61 billion to $64 billion, the midpoint of which is lower than the $63.14 billion that analysts are expecting. Meta also raised the lower end of its expense outlook to incorporate the $2.4 billion in legal expenses. It now expects total 2026 expenses to be in the range of $165 billion to $169 billion. Expenses for the second quarter were $42.03 billion, an increase of 55% year-over-year. Meta said this includes $2.40 billion of charges related to legal proceedings and $1.18 billion of severance expenses in connection with the layoffs announced in May. The company's free cash flow -- money left over after paying operating costs and capital expenditures -- dropped 91% to $784 million from $8.55 billion a year earlier. Meta's shares fell $24.76, or 4.2%, to $560.85 in after-hours trading after the results came out.

Meta's AI bill swallows nearly all of its free cash flow as profit falls 14%

Meta Platforms Inc.'s shares fell more than 8% in after-hours trading today after the social networking company beat revenue expectations for its fiscal 2026 second quarter but missed badly on earnings as costs rose 55%. For the quarter that ended on June 30, Meta reported diluted earnings per share of $6.18, down from $7.14 in the same quarter last year, on revenue of $60.80 billion, up 28%. Analysts had expected earnings of $7.22 per share on revenue of $60.24 billion, leaving the top line a modest beat and the bottom line a miss of about 14%. Net income came in at $15.85 billion, down 14%. Income from operations was $18.78 billion, an 8% decline. Operating margin narrowed to 31% from 43% a year ago. The cost line did the damage. Total costs and expenses rose 55%, to $42.03 billion. Research and development spending climbed 67%, to $21.66 billion, while general and administrative expenses more than doubled, to $5.61 billion, on $2.40 billion of charges tied to legal proceedings. Severance from the May headcount reduction added another $1.18 billion. That round cut about 8,000 jobs. Meta ended the quarter with 75,472 employees, 1% fewer than a year ago. Most of the workers cut in May are still counted in that figure. They will be out of it by the end of the third quarter, the company said. Capital spending consumed almost all of the cash the business generated. Operating cash flow came to $31.86 billion. Capital expenditures, including principal payments on finance leases, ran to $31.08 billion. That left free cash flow of $784 million. A year ago the figure was $8.55 billion. Meta bought back no stock at all in the quarter. A year earlier it spent $10.17 billion on repurchases. Dividend payments came to $1.35 billion. Meta also went to the debt markets, raising $24.91 billion during the quarter. Long-term debt now stands at $83.66 billion, up from $58.74 billion at the end of 2025. Cash, cash equivalents and marketable securities totaled $90.26 billion. Family of Apps, covering Facebook, Instagram, Messenger and WhatsApp, brought in $60.37 billion, up 28%. Advertising accounted for $59.36 billion of that, up 27%. Segment operating income fell 6%, to $23.39 billion. Reality Labs, which houses virtual and augmented reality hardware and software, had revenue of $431 million. That was up 16%, helped by demand for AI glasses. The unit lost $4.62 billion at the operating level, a little worse than the $4.53 billion it lost a year ago. Engagement recovered from last quarter's dip. Daily active people averaged 3.60 billion in June. That is up 3% from a year ago and up from 3.56 billion in March. Ad impressions across the Family of Apps rose 14%. The average price per ad rose 12%. "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," founder and Chief Executive Mark Zuckerberg said in the earnings release. "The results are already showing, and I'm optimistic about the potential ahead." On the earnings call, Zuckerberg said more than 1 million businesses now use Meta's business agents each week on WhatsApp and Messenger. Chief Financial Officer Susan Li put much of the expense growth down to pay for technical hires, particularly in artificial intelligence. She also pointed to infrastructure and cloud costs. The outlook offered little relief. Third-quarter revenue is forecast at $61 billion to $64 billion. Analysts had modeled roughly $63 billion, so the midpoint sits below what analysts had expected. Full-year expenses are now pegged at $165 billion to $169 billion, with the low end of the range up by $3 billion. Capital expenditures for 2026 were narrowed to $130 billion to $145 billion, from $125 billion to $145 billion. Meta also expects a tax rate of 15% to 17% for the rest of the year, against 13% to 16% previously. Youth-safety litigation got another mention. Trials are scheduled in the U.S. this year and Meta said they "may ultimately result in a material loss." The setup is familiar from Meta's first quarter, when a capital expenditure increase overshadowed a large earnings beat. This time there was no beat to overshadow. Revenue is still growing at 28%, but the spending needed to support it has absorbed nearly all of the cash it produces, and the legal bill is now arriving on top.

Meta's Stock Tumbles Over 10% After Profits Disappoint

Get personalized, AI-powered answers built on 27+ years of trusted expertise. Meta's stock is taking a hit after the social media giant posted earnings that missed analysts' estimates. Shares of Meta (META) were down nearly 9% in morning trading, sliding after the company's quarterly results added fuel to worries about its AI spending plans. The Facebook and Instagram parent yesterday posted second-quarter earnings per share of $6.18, below the $7.19 analysts had expected, despite a record $60.80 billion in revenue. Costs surged 55% as the company continues to invest heavily in AI infrastructure. Meta said it incurred $2.40 billion in charges tied to legal proceedings and $1.18 billion related to severance expenses after laying off 8,000 employees in May. Analysts at Goldman Sachs said the results could be interpreted "as a solid indicator of the application of AI compute to the company's core business but not quite the outsized positive returns that had been expected." "We still need greater clarity on the product pipeline & spending outlook," wrote analysts at JPMorgan. Thursday's slide leaves Meta shares about a third off their highs last year.

Meta Earnings Prediction Market Preview: Kalshi Traders Bet on the Cloud, Not the Llama - Meta Platforms

Meta Platforms (NASDAQ:META) reports second-quarter earnings after the bell today, with analysts expecting $7.23 per share on revenue of around $60.3 billion. What Kalshi Predicts Zuckerberg Will Say "Cloud" sits at 89%. Anthropic is reportedly in early talks to lease about $10 billion of computing power from Meta over two years, an arrangement Anthropic itself pitched in June. The compute market is tight enough that Anthropic may end up renting servers from a direct rival. Meta's new Muse Spark 1.1 has impressed since launching this month. Meta also hired Dave Brown this month, a nearly 19-year Amazon veteran who helped build its compute and machine learning services, to run the effort already dubbed Meta Compute. Analysts may read the hire as the starting gun on a real cloud business. "Hiring" trades at 85%. Meta cut 8,000 jobs in May while redirecting billions toward its AI buildout, and analysts may press on whether the nine-figure packages at Superintelligence Labs are earning their keep. "Llama" is at 41%. Muse Spark is replacing Llama across WhatsApp, Instagram, Facebook and its smart glasses, so traders are effectively betting on whether the old model gets named on its way out the door. What Kalshi Predicts Zuckerberg Will Skip "Dividend" sits at 39%. With capex guided to as much as $145 billion and reports Meta has weighed raising equity for AI infrastructure, traders think this call is about raising money, not returning it. "Nebius" trades at just 6% despite a reported $27 billion compute agreement with Nebius Group (NASDAQ:NBIS). Meta thanks its landlords privately. Reading The Board Last quarter Meta beat on both revenue and earnings and the stock fell anyway, purely on the capex number. Options traders are pricing a move of about 7% in either direction tonight. The capex question isn't going away. What's changed is that Zuckerberg may finally have the beginnings of an answer: a would-be cloud business, and a customer reportedly willing to pay up to $10 billion for it. Kalshi and Benzinga have an existing data collaboration agreement. Image: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Bank of America sends strong verdict to Meta stock investor

For five consecutive quarters, Meta Platforms did something that very few companies at its scale manage to pull off. It beat earnings expectations every single time, while simultaneously ramping one of the most aggressive AI spending programs in corporate history. The market rewarded both things. The stock climbed. The narrative held together. July 29 was different. Meta reported after the bell and the streak was gone. EPS came in at $6.18. The Street was looking for $7.20. The stock dropped nearly 9% in after-hours trading and landed at $542. The next morning, Bank of America's Justin Post released a note. His view was that the market got it wrong. Why Meta's Q2 earnings missed and what it actually means The revenue number was fine. Meta posted $60.8 billion in total revenue for Q2 2026, up 28% year on year and ahead of the $60.2 billion Street estimate. Advertising revenue was $59.4 billion, slightly above the $58.9 billion consensus. Other Family of Apps revenue came in at $1.007 billion, up 73% year on year and well above estimates, according to 24/7 Wall St. The miss was entirely in costs. Total expenses jumped 55% year over year to $42 billion. Inside that number were a $2.4 billion legal charge related to youth safety proceedings and a $1.2 billion severance charge tied to the 8,000-person headcount reduction Meta carried out in May 2026. Those are one-time items. They don't say anything about the trajectory of the advertising business. But they hit the EPS line hard enough to snap the earnings beat streak and send the stock down. Free cash flow dropped 91% year over year, from $8.55 billion in Q2 2025 to just $784 million. That's the number that worries investors who are already nervous about Meta's capital expenditure trajectory. Full-year 2026 capex guidance was narrowed to $130 billion to $145 billion from a prior range of $125 billion to $145 billion. Management also flagged that compute capacity would continue to grow in 2027 and potentially into 2028, though the company later clarified that it has the flexibility to adjust 2028 spending based on demand. What Bank of America said about Meta's AI advertising gains and capacity assets Post's note argues that the after-hours sell-off reflects concern about Meta's investment direction, rather than any deterioration in the underlying business. Instagram time spent was up 10% globally year over year. Facebook video time spent grew 9% globally. The high end of Meta's Q3 guidance implies 26% revenue growth excluding currency effects, a deceleration of just one percentage point on a three-point tougher comparison, and still well above the broader digital advertising sector. "AI capacity strengthening core ad business and provides strong optionality; compelling core valuation at 13x 2027 EPS," Post wrote in the note. "Buy." His thesis rests on two things the market is currently underpricing. 6 Meta AI catalysts Bank of America says could move META stock in 2026 Post's note outlines a specific catalyst path that he thinks can shift investor sentiment on Meta's AI spending. The next major milestone is Meta's Connect Conference on Sept. 23. Beyond that, the note identifies five additional potential catalysts over the following months, as TheStreet reported. The first is a frontier AI model launch. According to press reports cited in the note, Meta's next-generation model, internally code-named Watermelon, has already achieved frontier-level performance on internal benchmarks. A public launch at or after Connect could strengthen investor confidence in Meta's AI execution and move the stock. The second catalyst is a proprietary chip launch. Meta has been developing custom AI silicon for years. A public announcement of a production-ready chip would be a significant signal that Meta can reduce its dependence on Nvidia hardware. Third is a personal AI assistant launch. Fourth is a business AI revenue platform, including subscription products. Fifth is enterprise API licensing deals that give external companies access to Meta's AI models and compute capacity. Any one of these could change the narrative around whether Meta's spending will generate returns, according to CNBC. Why Bank of America cut the Meta price target to $810from $825 The price target cut to $810 from $825 was driven by a 1% reduction in 2027 GAAP EPS estimates, to $34.73 from $35.00. Post raised revenue estimates slightly for both 2026 and 2027, but increased expense forecasts to reflect the one-time charges, higher stock-based compensation, and lower other income from higher interest costs. The valuation multiple stayed at 24 times 2027 earnings. At the after-hours price of $542, Post's note puts the stock at 16 times 2027 earnings on a total company basis, or 13 times when stripping out Reality Labs losses. The S&P 500 trades at around 20 times 2027 earnings. Historically, Meta has traded at a three-point premium to the index. Right now it's trading at a meaningful discount, which is the core of Post's valuation argument. The $810 price target from the July 30 closing price of $585.61 implies roughly 38% upside. Post acknowledges that meaningful AI monetization outside advertising may take time to materialize. But his argument is that even if the AI revenue story takes longer than expected, Meta retains the flexibility to moderate its infrastructure buildout, which would drive a significant uptick in free cash flow. At the current valuation, he sees more upside than downside, regardless of which scenario plays out. What Meta's Q2 earnings and the BofA note mean for META stock investors The core debate around Meta hasn't changed after this quarter. Bulls see a company building the infrastructure for consumer AI, enterprise software, and cloud computing while simultaneously running one of the world's largest advertising businesses. Bears question whether the capital spending will ever generate returns that justify the cost. The Q2 miss gave the bears a data point. The advertising metrics gave the bulls theirs. Post's note is a bet on the bulls. He thinks the market is too focused on the size of the AI investments and not focused enough on what those investments are starting to produce. The Watermelon model, the Connect Conference, and the possibility of external capacity deals are the events he's watching to determine whether that thesis is right. META stock is down roughly 7% on the day. Bank of America is staying long. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc. This story was originally published July 31, 2026 at 8:33 PM.

Meta stock plunges as Zuckerberg's AI gamble devours its cash

Meta Platforms (META) generated the kind of sales growth most firms would be thrilled to see. Wall Street retaliated by cutting about 9% off the stock early Thursday, July 30. Facebook's and Instagram's parent company earned $60.8 billion in sales in the second quarter, up 28% from a year ago. Advertising income jumped 27% to $59.36 billion, everyday users rose, and the average amount Meta charged advertisers rose substantially. Then investors turned to the cash-flow statement. Meta earned $31.86 billion in operational cash flow. Capital expenditures totaled $31.08 billion, leaving free cash flow of a mere $784 million. That was a staggering 91% drop from $8.55 billion a year ago. Costs and expenses jumped 55% to $42.03 billion. Operating margin dropped to 31% from 43%, operating income was down 8%, and net income plummeted 14% to $15.85 billion. Not all the deterioration was down to artificial intelligence. Meta took a $2.4 billion litigation charge and $1.18 billion in severance costs. But the message from the sell-off was brutal: Wall Street thinks CEO Mark Zuckerberg's AI ambitions are burning cash faster than Meta can prove it will generate any. "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," Zuckerberg said. Meta's ad machine is funding a historic cash bonfire Meta's advertising business is still scary powerful. Advertising revenues grew to $59.36 billion from $46.56 billion a year earlier. Ad impressions across Meta's family of applications rose 14%, while the average revenue per ad grew 12%. Those gains imply Meta is attracting more advertising activity and getting more dollars for it. Its audience isn't going away, either. An average of 3.6 billion individuals used at least one Meta application every day in June, up 3% from a year ago. Zuckerberg said Instagram also hit 2 billion daily users, and Threads topped 500 million monthly users. The problem isn't the cash flow from operations. That actually rose around 25% to $31.86 billion. The problem is that most of it was eaten up by capital spending. In the three months, Meta spent $31.08 billion on property and equipment, primarily as it scrambled to get chips, servers, networking equipment, power, and data center capacity for its AI systems. Research and development expenditure adds to the pressure. That expense jumped to $21.66 billion from $12.94 billion, by far Meta's greatest operational expense. The company also boosted the bottom end of its 2026 capital expenditure forecast to $130 billion from $125 billion, while keeping the top at $145 billion. Meta had guided spending at between $115 billion and $135 billion for the year. Bloomberg / Getty Images Zuckerberg now faces a brutal prove-it quarter Meta's outlook offered little reason for investors to expect the spending pressure will ease anytime soon. The company anticipates third-quarter revenue of $61 billion to $64 billion. The midpoint of $62.5 billion was shy of the $63.14 billion economists had projected, according to FactSet projections quoted by the Associated Press. Meta also raised its full-year expense guidance to a range of $165 billion to $169 billion. It makes for a brutal setup. Meta has to grow its advertising revenue fast enough to pay for an infrastructure push that could cost as much as $145 billion this year. It has to accomplish that while defending margins, negotiating legal concerns, and trying to build wholly new AI businesses before investors decide the anticipated payback is too distant. This company has a lot of resources. Meta had $90.26 billion in cash, cash equivalents, and marketable securities as of the end of June, but also had $83.66 billion in long-term debt. Its advertising business still generates tens of billions of dollars in quarterly operating cash flow. The business is not necessarily cash-poor at this moment. It faces a more threatening challenge for a premium technology stock: a credibility deficit. Key takeaways for Meta investors * Free cash flow collapsed 91% to $784 million. * Capital expenditures reached $31.08 billion in one quarter. * Revenue surged 28% to $60.8 billion. * Operating margin fell 12 percentage points to 31%. * Net income declined 14% despite booming advertising sales. * Meta could spend as much as $145 billion on capital expenditures this year. * Third-quarter guidance failed to silence concerns about the payoff from AI. The bullish take here is that Meta is giving up cash flow today to get the computational power necessary for the next big technology platform. When personal AI agents and enterprise solutions start generating income, it has a strong edge in its huge audience, sophisticated advertising system, and money. The bearish interpretation is a much more explosive one. Meta's ad engine grew at an extraordinary clip, yet profitability declined, and almost no free cash rolled in. The company is spending at a cloud-provider scale without yet having a cloud-provider revenue stream, and Zuckerberg expects shareholders to trust that businesses supporting the expenditure will eventually arise. Meta doesn't have to prove that artificial intelligence is valuable. It needs to show that Meta can get more value from the technology than the tremendous amount of cash it is throwing into it. Zuckerberg constructed one of the most profitable ad factories in history. And now he's pouring almost all of Wall Street's excess capital into an AI empire that isn't yet completely realized. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc. This story was originally published July 31, 2026 at 11:33 AM.

Meta Shares Slide After Q2 Earnings Miss Despite Strong Revenue Growth

Meta reported earnings per share of $6.18 for the quarter, below analyst expectations of around $7.14. Revenue reached $60.8 billion, exceeding forecasts of $60.2 billion and marking a 28% increase from the previous year. According to the earnings report, Meta's EPS figure included several one-time expenses that reduced quarterly profit. The company recorded a $2.4 billion charge linked to legal contingencies and $1.2 billion in severance expenses. Without these charges, Meta's earnings performance would have been stronger. However, investors focused on the reported profit figure as the company continues to increase spending across artificial intelligence projects and data center expansion. Meanwhile, Meta's advertising business continued to deliver growth during the quarter. Advertising revenue reached $59.3 billion, slightly above analyst expectations of $59.07 billion. The company's platforms, including Facebook and Instagram, continued generating most of its revenue. Meta has also linked improvements in advertising performance to artificial intelligence tools used for recommendations and ad targeting.

Meta's record losing streak continues while Microsoft, chip stocks jump on AI earnings

Meta stock tumbled 9.4% Thursday on its disappointing earnings report - extending a record losing streak - even as Microsoft and chipmaker stocks soared. Menlo Park, Calif.-based Meta - which owns Facebook, Instagram and WhatsApp - said Wednesday that its free cash flow has plunged 91% over the past year to $784 million, as it plans to spend as much as $145 billion this year on memory chips and data centers. During Meta's earnings call Wednesday, CEO Mark Zuckerberg failed to provide a clear timeline on when that massive capex will start generating returns - and in the meantime, Meta's second-quarter earnings and its forecast for the current quarter missed Wall Street estimates. "Right now, the narrative from Mark Zuckerberg is a little light on detail and relying on what could be done in the future," Ben Barringer, head of technology research at Quilter Cheviot, said in a note Thursday. "Meta still has a crucial role to play in the AI world, but it is still finding its way somewhat and that is why we see both costs and revenues looking a little volatile." The stock is down 12.5% over the past week and on track to hit 11 days in the red, its longest-ever losing streak. In the second quarter, Meta reported earnings per share of $6.18 on revenue of $60.8 billion, missing Wall Street expectations of earnings of $7.14 a share on $60.2 billion in revenue. It expects revenue in the current quarter to reach $61 billion to $64 billion, or a middle point of $62.5 billion. That again missed estimates of $63.15 billion. Reports that Meta could start selling off excess computing power pushed the stock higher earlier this month as traders hoped the plan could help the company recover some of the billions it has sunk into the new tech. Zuckerberg said Wednesday that Meta is "getting a lot of offers for compute at a significant premium" over what the company paid for it, but he did not share details on how the company might start selling off its trove of coveted compute. He also reiterated that Meta will need to hold onto compute for its own AI ambitions. For weeks, tech and chip stocks have suffered choppy trading sessions amid mounting fears around a potential "AI bubble" and concerns that China's own technology is catching up to American rivals. But on Thursday, Microsoft's stock soared after an upbeat earnings report and other AI chip stocks rose - signaling that investors are still hopeful that other companies in the AI trade could win big. Shares of Microsoft jumped 17% after it reported 43% growth in its Azure cloud business and fourth-quarter revenue above Wall Street estimates. It also said it now has more than 30 million paid seats for Microsoft 365 Copilot, its AI work assistant - up from 20 million in April, a sign that its own $190 billion in AI spending is starting to pay off. The stock is on track for its best day since March 13, 2020, even after it signaled it might ramp up spending further in its 2027 fiscal year. Meanwhile, chip stocks including AMD, Broadcom and Nvidia jumped 13.3%, 4.2% and 2%, respectively.

Meta earnings analysis: questions answered and next catalysts By Investing.com

Investing.com -- Meta's Q2 2026 delivered a tale of two metrics: revenue of $60.8B beat consensus by $610M (+28% YoY), but EPS of $6.18 came in 13.8% below the $7.17 estimate -- sending shares down 8.75% to $534.39. The culprit isn't a broken business; it's a company voluntarily absorbing near-term profit pressure to build an AI infrastructure base at significant scale. The Revenue Engine Held Meta Platforms (META) printed $60.8B in Q2 2026 revenue -- beating the $60.19B consensus and extending a notable streak: Meta has beaten its own revenue guidance midpoint in 15 of the past 17 quarters. Ad demand remains structurally robust, corroborated by Alphabet's own Q2 showing +14% advertising growth. The top line is not the problem. Where the EPS Went The $6.18 EPS miss of -13.8% had three visible culprits -- all deliberate, not accidental: The result: operating margin fell from ~43% to 31%, operating income declined 8% YoY to $18.8B, and free cash flow was $784M -- a modest figure for a company of this scale. Questions the Quarter Answered 1. Is ad revenue still compounding? Yes -- +28% YoY confirms Meta's core flywheel (AI-powered ad targeting + Reels engagement) is intact. Online commerce remains the largest vertical contributor. 2. How big is the AI CapEx commitment? Substantial and growing. Full-year 2026 CapEx guidance was narrowed upward to $130B-$145B (prior: $125B-$145B). The Meta-BlackRock $14B AI data center JV in El Paso -- announced just days before earnings -- underscores that this isn't slowing. Moody's now estimates CapEx at ~55% of sales in 2026-2027. 3. Are new surfaces monetizing? Early evidence -- Threads ads are live, WhatsApp status ads launched, and the new "Seller" app targets Facebook Marketplace merchants. None are material yet, but the runway is being built. 4. Did the May headcount cut help? Not yet -- $1.2B in severance absorbed the near-term savings. The benefit is a 2H 2026 story. Questions Still Open 1. When does CapEx become revenue? The $130B-$145B infrastructure spend is the central unanswered question. Baird's bull case ("AI costs embedded in expectations; revenue upside is not") is the thesis -- but proof is absent. 2. Can Meta AI monetize? 3.4B daily active users is a significant distribution moat for an AI assistant. The Muse Spark 1.1 model with task automation is live in select markets. But no revenue contribution has been disclosed. 3. Reality Labs / Orion path to profitability? Needham's Hold rests on this: LLAMA, Quest, Orion, Ray-Ban Glasses, and Metaverse are all net capital users. Zuckerberg's multi-gigawatt Prometheus cluster signals the bet is bigger, not smaller. Next Catalysts The Core Tension Meta is essentially running two companies: a highly profitable ad machine (Family of Apps) and a pre-revenue AI infrastructure bet consuming cash at an unprecedented rate. The market's -8.75% reaction is a short-term profitability protest -- but the annual consensus tells the bull story: $253B in 2026 revenue → $304B in 2027 → $358B in 2028, with EPS forecasts of $32.91 → $35.12 → $40.65. The question isn't whether Meta is building something powerful -- it's whether the return timeline justifies the cash burn before FCF normalizes. This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Meta: Growth Resists, but Margins Weigh on Profit

The social media and digital advertising giant posted revenue of $60.80bn, up 28% y-o-y and above the $60.22bn expected, while diluted EPS of $6.18 came in well below the $7.187 consensus and were down 13% from a year earlier. Ad impressions rose 14% and the average price per ad increased 12%. That profit miss should nonetheless be tempered by $2.4bn in charges related to legal proceedings and $1.18bn in restructuring costs, while total expenses jumped 55%. Its Operating margin thus fell back to 31%, from 43% a year earlier, as operating income declined 8%. Beyond these one-off items, the ramp-up in AI investment is becoming increasingly visible in the numbers, with $31.1bn of capex in Q2, versus $19.8bn three months earlier, cutting free cash flow to just $784m. In a market already on edge over the massive sums hyperscalers are pouring into data centers and compute power, Meta has not delivered any real new shock on the investment front, as the group now targets $130bn to $145bn of capex in 2026, versus $125bn to $145bn previously.