Meta earnings disappoint as AI investments devour cash flow and drive costs up 55%

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.

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.

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: 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.