Meta's Q2 2025 Earnings Reveal Strong Performance and AI-Driven Growth

We're raising our Meta price target big time after a stellar quarter and an incredible guide

Meta Platforms shares soared Wednesday evening after the social media juggernaut delivered what can only be described as a blowout quarter. The only thing better than the reported results was the guidance. Revenue in the second quarter ended June 30 climbed 22% year over year to $47.52 billion, far exceeding the consensus estimate of $44.8 billion, according to LSEG. Earnings per share (EPS) surged 38% on an annual basis to $7.14, crushing expectations of $5.92, LSEG data showed. META YTD mountain Meta's year-to-date stock performance. Meta shares jumped more than 11.5% to $776 each in after-hours trading, which would easily be a new record high close if the stock finished Thursday at these levels. We're keeping our hold-equivalent 2 rating because it's not our style to chase this kind of rally. However, we are raising our Meta stock price target to $825 per share from $800. Bottom line Coming into Wednesday evening's release, our primary concern was with management's revised outlook on expenses. After all, we know CEO Mark Zuckerberg has taken the gloves off, ready to go to war with anyone looking to compete in artificial intelligence. With competitor Alphabet's spending outlook hike this week and the recent news of Zuckerberg offering up hundreds of millions to those he believes can ensure Meta is the first to achieve "super intelligence," the Street was ready for some kind of raise. The concern was that it would be more than investors could digest. Fortunately, that was not the case. While the team did increase their outlook for both capital expenditures and total expenses for the full year, at the midpoint, they kept the upper end of the prior guidance range for both intact. Meta Platforms Why we own it : Meta Platforms dominants the world of targeted advertising with excellent technology, and its strong user engagement makes it a great place to advertise. The company's scale provides the financial power and employee talent needed to pursue new growth avenues such as artificial intelligence, the metaverse, and virtual and augmented reality projects. Improved profitability in recent years has been a boon to earnings. Competitors : Alphabet , TikTok (owned by China's ByteDance) and Snap Weight in portfolio : 4.55% Most recent buy : Sept. 6, 2022 Initiated : May 29, 2014 Between absolutely trouncing expectations for the reported quarter, guiding to a third (current) quarter revenue range that surpassed expectations, even on the low end, and keeping the upper cap on full-year expenses, it's no wonder we're seeing shares surge. As of Wednesday's close, Meta was already up nearly 19% for the year. Given how aggressively management is pushing into AI, while ensuring the core business continues to dominate and grow, we see plenty of room for the stock to run from here. Not to mention, the stock doesn't look all that expensive versus the overall market, at less than 27 times 2026 earnings estimates. Those earnings estimates will undoubtedly move higher following the Q2 strength, which could send the stock's multiple below 26. Commentary This was a phenomenal quarter from Meta, with the revenue beat compounded by significant year-over-year operating margin expansion that helped translate into a monster EPS beat. Strength was seen in all key operating geographies, and cash flow was plenty strong enough to support the slightly higher-than-expected capex line item. Perhaps most important, though, is that Meta continues to drive strong engagement, with Family of Apps daily active people growing over 6% year over year to a greater-than-expected 3.48 billion. The Family of Apps segment includes Facebook, Instagram, WhatsApp, and Messenger. Zuckerberg noted on the post-earnings call that investments in AI are bringing users more content that they can better connect with. "Advancements in our recommendation systems have improved quality so much that it has led to a 5% increase in time spent on Facebook and 6% on Instagram. Just this quarter," he said. On the ad side, Zuckerberg touted the benefits of the company's investments in artificial intelligence, with a roughly 5% increase in ad conversions on Instagram and a 3% increase on Facebook, thanks to the expanded implementation of its AI-powered recommendation models. "We're also seeing good progress with AI for ad creative," he said. "With a meaningful percentage of our ad revenue now coming from campaigns using one of our generative AI features. This is going to be especially valuable for smaller advertisers with limited budgets." The release highlighted 11% year-over-year growth in ad impressions across the Family of Apps, along with a 9% year-over-year increase in the average price per ad. CFO Susan Li also highlighted strong video engagement trends, saying that "Instagram video time was up more than 20% year over year globally." She added, "We're seeing strong traction on Facebook as well, particularly in the U.S., where video time spent similarly expanded more than 20% year over year." Regarding WhatsApp, Li noted on the call that paid messaging revenue was the key driver behind the 50% increase in so-called Other revenue to $583 million. However, the benefit of the strong user base appears to go beyond WhatsApp, with Li adding that "WhatsApp continues to be the largest driver of queries as people message meta AI directly for tasks such as information gathering, homework assistance, and generating images outside of WhatsApp." The Reality Labs segment saw 5% year-over-year revenue growth to $370 million, driven by sales of AI glasses, but partially offset by lower revenue from Quest headsets. However, the division lost $4.53 billion in the second quarter, a bigger loss than a year-ago but not as big as expected. Outside of the core business, Zuckerberg also sees advancements in artificial intelligence driving deeper engagement with Meta AI -- the company's answer to ChatGPT -- which now has over 1 billion monthly active users. "We continue to see strong momentum with our Ray-Ban Meta glasses, with sales accelerating," he said. Last month, Meta debuted new Oakley Meta smart glasses, the latest from the tech giant's partnership with eyewear maker EssilorLuxottica. Regarding cash returns to shareholders, Meta repurchased $9.76 billion shares in the quarter and paid out another $1.33 billion in dividends. Guidance Meta expects third-quarter revenue in the range of $47.5 billion to $50.5 billion, which, even on the low end, easily surpasses consensus expectations of $46.15 billion, according to LSEG. As mentioned earlier, the company raised the lower end of its full-year capital expenditures forecast, now targeting between $66 billion and $72 billion, up from the prior range of $64 billion to $72 billion. The team said, on the release, that they expect "another year of similarly significant capital expenditures dollar growth in 2026 as we continue aggressively pursuing opportunities to bring additional capacity online to meet the needs of our artificial intelligence efforts and business operations." Meta raised the lower end of its 2025 total expenses guidance to between $114 billion and $118 billion, up from the prior range of $113 billion to $118 billion. The team expects the total expense growth rate in 2026 to be above the rate seen in 2025. While both the capex and the total expense guides track a bit above expectations, according to FactSet, and the same appears to be true of that preliminary 2026 guidance commentary, it's clear that the Street will allow it, at least for now. Meta is being a wide berth since the investments, thus far, are clearly paying off and helping ensure that the company is set up for further growth in the years ahead as artificial intelligence becomes ever more pervasive in our daily lives. (Jim Cramer's Charitable Trust is long META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Meta Platforms : Q2 2025 Earnings Call Prepared Remarks

Second Quarter 2025 Results Conference Call - Prepared Remarks July 30th, 2025 Kenneth Dorell, Director, Investor Relations Thank you. Good afternoon and welcome to Meta's second quarter 2025 earnings conference call. Joining me today are Mark Zuckerberg, CEO and Susan Li, CFO. Our remarks today will include forward‐looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors including those set forth in today's earnings press release, and in our quarterly report on Form 10-Q filed with the SEC. We undertake no obligation to update any forward-looking statement. During this call we will present both GAAP and certain non‐GAAP financial measures. A reconciliation of GAAP to non‐GAAP measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our website at investor.atmeta.com. And now, I'd like to turn the call over to Mark. Mark Zuckerberg, CEO Thanks Ken -- thanks everyone for joining today. We had another strong quarter with more than 3.4 billion people using at least one of our apps each day -- and strong engagement across the board. Our business continues to perform very well, which enables us to invest heavily in our AI efforts. Over the last few months we have begun to see glimpses of our AI systems improving themselves. The improvement is slow for now, but undeniable. Developing superintelligence -- which we define as AI that surpasses human intelligence in every way -- we think is now in sight. Meta's vision is to bring personal superintelligence to everyone -- so that people can direct it towards what they value in their own lives. We believe this has the potential to begin an exciting new era of individual empowerment. A lot has been written about the economic and scientific advances that superintelligence can bring. I am extremely optimistic about this. But I think that if history is a guide, then an even more important role will be how superintelligence empowers people to be more creative, develop culture and communities, connect with each other, and lead more fulfilling lives. To build this future, we've established Meta Superintelligence Labs, which includes our foundations, product, and FAIR teams, as well as a new lab that is focused on developing the next generation of our models. We're making good progress towards Llama 4.1 and 4.2 -- and in parallel, we're also working on our next generation of models that will push the frontier in the next year or so. We're building an elite, talent-dense team. Alexandr Wang is leading the overall team, Nat Friedman is leading our AI products and applied research, and Shengjia Zhao is Chief Scientist for the new effort. They're all incredibly talented leaders and I'm excited to work closely with them and the world-class group of AI researchers, and infrastructure and data engineers that we're assembling. I've spent a lot of time building this team this quarter, and the reason that so many people are excited to join is because Meta has all the ingredients required to build leading models and deliver them to billions of people. The people who are joining us are going to have access to unparalleled compute as we build out several multi-GW clusters. Our Prometheus cluster is coming online next year and we think it'll be the world's first 1GW+ cluster. We're also building out Hyperion, which will be able to scale up to 5GW over several years. And we have multiple more titan clusters in development as well. We're making all these investments because we have conviction that superintelligence is going to improve every aspect of what we do. From a business perspective, I mentioned last quarter that there are five basic opportunities that we're pursuing: improved advertising, more engaging experiences, business messaging, Meta AI, and AI devices. So I can go into a bit of detail on each. On advertising, the strong performance this quarter is largely thanks to AI unlocking greater efficiency and gains across our ads system. This quarter, we expanded our new AI-powered recommendation model for ads to new surfaces and improved its performance by using more signals and a longer context. It's driven roughly 5% more ad conversions on Instagram and 3% on Facebook. We're also seeing good progress with AI for ad creative -- with a meaningful percent of our ad revenue now coming from campaigns using one of our Generative AI features. This is going to be especially valuable for smaller advertisers with limited budgets, while agencies will continue to the important work to help larger brands apply these tools strategically. The second opportunity is more engaging experiences. AI is significantly improving our ability to show people content that they're going to find interesting and useful. Advancements in our recommendation systems have improved quality so much that it has led to a 5% increase in time spent on Facebook and 6% on Instagram just this quarter. There's a lot of potential for content itself to get better too. We're seeing early progress with the launch of our AI video editing tools across Meta AI and our new Edits app, and there's a lot more to do here. The third opportunity is business messaging. I've talked before about how I believe every business will soon have a business AI just like they have an email address, social media account, and website. We're starting to see some product market fit in a number of countries where we're testing these agents, and we're integrating these business AIs into ads on Facebook and Instagram, as well as directly into e-commerce websites. The fourth opportunity is Meta AI. Its reach is already quite impressive with more than a billion monthly actives. Our focus is now deepening the experience and making Meta AI the leading personal AI. As we continue improving our models we see engagement grow, so our next generation of models is going to continue to really help here. The fifth opportunity is AI devices. We continue to see strong momentum with our Ray-Ban Meta glasses, with sales accelerating. We're also launching new performance AI glasses with the Oakley Meta HSTNs. They have longer battery life, higher resolution camera, and are designed for sports. The percent of people using Meta AI is growing and we're seeing new users' AI retention increase too, which is a good sign for that continued use. I think AI glasses will become the main way we integrate superintelligence into our day-to-day lives, so it's important to have all these different styles that appeal to different people in different settings. Finally, we're seeing people continue to spend more time with our Quest ecosystem and the community continues to grow steadily. We launched the Meta Quest 3S Xbox Edition last month, and we're seeing record interest in cloud gaming. And beyond gaming, we continue to see a broader set of use cases with media and web-browsing contributing a significant portion of engagement. We're going to have more to share on all of this, especially our Reality Labs work, at Connect on September 17th, so I encourage you to tune into that. Overall, this has been a busy quarter. Strong business performance and real momentum in assembling both the talent and the compute needed to build personal superintelligence for everyone. I am very grateful for our teams who are working hard to deliver this, and thanks to all of you for being on this journey with us. And now, here's Susan. Susan Li, CFO Thanks Mark and good afternoon everyone. Let's begin with our consolidated results. All comparisons are on a year-over-year basis unless otherwise noted. Q2 total revenue was $47.5 billion, up 22% on both a reported and constant currency basis. Q2 total expenses were $27.1 billion, up 12% compared to last year. In terms of the specific line items: Cost of revenue increased 16%, driven mostly by higher infrastructure costs and payments to partners, partially offset by a benefit from the previously announced extension of server useful lives. R&D increased 23%, mostly due to higher employee compensation and infrastructure costs. Marketing & Sales increased 9%, primarily due to an increase in professional services related to our ongoing platform integrity efforts as well as marketing costs, partially offset by lower employee compensation. G&A decreased 27%, driven mostly by lower legal-related costs. We ended Q2 with over 75,900 employees, down 1% quarter-over-quarter as the vast majority of the employees impacted by performance-related reductions earlier this year were no longer captured in our headcount. This was partially offset by continued hiring in priority areas of monetization, infrastructure, Reality Labs, AI, as well as regulation and compliance. Second quarter operating income was $20.4 billion, representing a 43% operating margin. Our tax rate for the quarter was 11%, which reflects excess tax benefits from share based compensation due to the increase in our share price versus prior periods. Net income was $18.3 billion or $7.14 per share. Capital expenditures, including principal payments on finance leases, were $17.0 billion, driven by investments in servers, data centers and network infrastructure. Free cash flow was $8.5 billion. We repurchased $9.8 billion of our Class A common stock and paid $1.3 billion in dividends to shareholders. We also made $15.1 billion in non-marketable equity investments in the second quarter, which includes our minority investment in Scale AI along with other investment activities. We ended the quarter with $47.1 billion in cash and marketable securities and $28.8 billion in debt. Moving now to our segment results. I'll begin with our Family of Apps segment. Our community across the Family of Apps continues to grow, and we estimate more than 3.4 billion people used at least one of our Family of Apps on a daily basis in June. Q2 Total Family of Apps revenue was $47.1 billion, up 22% year-over-year. Q2 Family of Apps ad revenue was $46.6 billion, up 21% or 22% on a constant currency basis. Within ad revenue, the online commerce vertical was the largest contributor to year-over-year growth. On a user geography basis, ad revenue growth was strongest in Europe and Rest of World at 24% and 23%, respectively. North America and Asia-Pacific grew 21% and 18%. In Q2, the total number of ad impressions served across our services increased 11%, with growth mainly driven by Asia-Pacific. Impression growth accelerated across all regions due primarily to engagement tailwinds on both Facebook and Instagram and, to a lesser extent, ad load optimizations on Facebook. The average price per ad increased 9%, benefiting from increased advertiser demand, largely driven by improved ad performance. Pricing growth slowed modestly from the first quarter due to the accelerated impression growth in Q2. Family of Apps other revenue was $583 million, up 50%, driven by WhatsApp paid messaging revenue growth as well as Meta Verified subscriptions. We continue to direct the majority of our investments toward the development and operation of our Family of Apps. In Q2, Family of Apps expenses were $22.2 billion, representing 82% of our overall expenses. Family of Apps expenses were up 14%, mainly due to growth in employee compensation and infrastructure costs, partially offset by lower legal-related costs. Family of Apps operating income was $25.0 billion, representing a 53% operating margin. Within our Reality Labs segment, Q2 revenue was $370 million, up 5% year-over-year due to increased sales of AI glasses, partially offset by lower Quest sales. Reality Labs expenses were $4.9 billion, up 1% year-over-year driven by higher non-headcount related technology development costs. Reality Labs operating loss was $4.5 billion. Turning now to the business outlook. There are two primary factors that drive our revenue performance: our ability to deliver engaging experiences for our community, and our effectiveness at monetizing that engagement over time. On the first, daily actives continue to grow across Facebook, Instagram and WhatsApp as we make additional improvements to our recommendation systems and product experiences. We continue to see momentum with video engagement in particular. In Q2, Instagram video time was up more than 20% year-over-year globally. We're seeing strong traction on Facebook as well, particularly in the US where video time spent similarly expanded more than 20% year-over-year. These gains have been enabled by ongoing optimizations to our ranking systems to better identify the most relevant content to show. We expect to deliver additional improvements throughout the year as we further scale up our models and make recommendations more adaptive to a person's interests within their session. Another emphasis of our recommendations work is promoting original content. On Instagram, over two-thirds of recommended content in the US now comes from original posts. In the second half, we'll be focused on further increasing the freshness of original posts so the right audiences can discover original content from creators soon after it is posted. We are also making good progress on our longer-term ranking innovations that we expect will provide the next leg of improvements over the coming years. Our research efforts to develop cross-surface foundation recommendation models continue to progress. We are also seeing promising results from using LLMs in Threads recommendation systems. The incorporation of LLMs are now driving a meaningful share of the ranking-related time spent gains on Threads. We're now exploring how to extend the use of LLMs in recommendation systems to our other apps. We're leveraging Llama in several other back-end processes as well, including actioning bug reports so we can identify and resolve recurring issues more quickly and efficiently. This has resulted in top-line bug reports in the US & Canada in Facebook Feed and Notifications dropping by roughly 30% over the past 10 months. The primary way we're using Llama in our apps today is to power Meta AI, which is now available in over 200 countries and territories. WhatsApp continues to be the largest driver of queries as people message Meta AI directly for tasks such as information gathering, homework assistance, and generating images. Outside of WhatsApp, we're seeing Meta AI become an increasingly valuable complement to our content discovery engines. Meta AI usage on Facebook is expanding as people use it to ask about posts they see in Feed and find content across our platform in Search. Another way we expect Meta AI will help with content discovery is through the automatic

Meta Platforms : Q2 2025 Earnings Call Earnings Call Transcript

Thank you. Good afternoon and welcome to Meta's second quarter 2025 earnings conference call. Joining me today are Mark Zuckerberg, CEO and Susan Li, CFO. Our remarks today will include forward‐looking statements, which are based on assumptions as of today. Actual results may differ materially as a result of various factors including those set forth in today's earnings press release, and in our quarterly report on Form 10-Q filed with the SEC. We undertake no obligation to update any forward-looking statement. During this call we will present both GAAP and certain non‐GAAP financial measures. A reconciliation of GAAP to non‐GAAP measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our website at investor.atmeta.com. We had another strong quarter with more than 3.4 billion people using at least one of our apps each day -- and strong engagement across the board. Our business continues to perform very well, which enables us to invest heavily in our AI efforts. Over the last few months we have begun to see glimpses of our AI systems improving themselves. The improvement is slow for now, but undeniable. Developing superintelligence -- which we define as AI that surpasses human intelligence in every way -- we think is now in sight. Meta's vision is to bring personal superintelligence to everyone -- so that people can direct it towards what they value in their own lives. We believe this has the potential to begin an exciting new era of individual empowerment. A lot has been written about the economic and scientific advances that superintelligence can bring. I am extremely optimistic about this. But I think that if history is a guide, then an even more important role will be how superintelligence empowers people to be more creative, develop culture and communities, connect with each other, and lead more fulfilling lives. To build this future, we've established Meta Superintelligence Labs, which includes our foundations, product, and FAIR teams, as well as a new lab that is focused on developing the next generation of our models. We're making good progress towards Llama 4.1 and 4.2 -- and in parallel, we're also working on our next generation of models that will push the frontier in the next year or so. We're building an elite, talent-dense team. Alexandr Wang is leading the overall team, Nat Friedman is leading our AI products and applied research, and Shengjia Zhao is Chief Scientist for the new effort. They're all incredibly talented leaders and I'm excited to work closely with them and the world-class group of AI researchers, and infrastructure and data engineers that we're assembling. I've spent a lot of time building this team this quarter, and the reason that so many people are excited to join is because Meta has all the ingredients required to build leading models and deliver them to billions of people. The people who are joining us will have access to unparalleled compute as we build out several multi-GW clusters. Our Prometheus cluster is coming online next year and we think it'll be the world's first 1GW+ cluster. We're also building out Hyperion, which will be able to scale up to 5GW over several years. And we have multiple more titan clusters in development as well. We're making all these investments because we have conviction that superintelligence is going to improve every aspect of what we do. From a business perspective, I mentioned last quarter that there are five basic opportunities that we're pursuing: improved advertising, more engaging experiences, business messaging, Meta AI, and AI devices. So I can go into a bit of detail on each. On advertising, the strong performance this quarter is largely thanks to AI unlocking greater efficiency and gains across our ads system. This quarter, we expanded our new AI-powered recommendation model for ads to new surfaces and improved its performance by using more signals and a longer context. It's driven roughly 5% more ad conversions on Instagram and 3% on Facebook. We're also seeing good progress with AI for ad creative -- with a meaningful percent of our ad revenue now coming from campaigns using one of our Generative AI features. This is going to be especially valuable for smaller advertisers with limited budgets, while agencies will continue the important work to help larger brands apply these tools strategically. The second opportunity is more engaging experiences. AI is significantly improving our ability to show people content that they're going to find interesting and useful. Advancements in our recommendation systems have improved quality so much that it has led to a 5% increase in time spent on Facebook and 6% on Instagram just this quarter. There's a lot of potential for content itself to get better too. We're seeing early progress with the launch of our AI video editing tools across Meta AI and our new Edits app, and there's a lot more to do here. The third opportunity is business messaging. I've talked before about how I believe every business will soon have a business AI just like they have an email address, social media account, and website. We're starting to see some product market fit in a number of countries where we're testing these agents, and we're integrating these business AIs into ads on Facebook and Instagram, as well as directly into e-commerce websites. The fourth opportunity is Meta AI. Its reach is already quite impressive with more than a billion monthly actives. Our focus is now deepening the experience and making Meta AI the leading personal AI. As we continue improving our models we see engagement grow, so our next generation of models is going to continue to really help here. The fifth opportunity is AI devices. We continue to see strong momentum with our Ray-Ban Meta glasses, with sales accelerating. We're also launching new performance AI glasses with the Oakley Meta HSTNs. They have longer battery life, higher resolution camera, and are designed for sports. The percent of people using Meta AI is growing and we're seeing new users' AI retention increase too, which is a good sign for that continued use. I think that AI glasses are going to be the main way that we integrate superintelligence into our day-to-day lives, so it's important to have all these different styles that appeal to different people in different settings. Finally, we're seeing people continue to spend more time with our Quest ecosystem and the community continues to grow steadily. We launched the Meta Quest 3S Xbox Edition last month, and we're seeing record interest in cloud gaming. And beyond gaming, we continue to see a broader set of use cases with media and web-browsing contributing a significant portion of engagement. We're going to have more to share on all of this, especially our Reality Labs work, at Connect on September 17th, so I encourage you to tune into that. Overall, this has been a busy quarter. Strong business performance and real momentum in assembling both the talent and the compute needed to build personal superintelligence for everyone. I am very grateful for our teams who are working hard to deliver this, and thanks to all of you for being on this journey with us. And now, here's Susan. Let's begin with our consolidated results. All comparisons are on a year-over-year basis unless otherwise noted. Q2 total revenue was $47.5 billion, up 22% on both a reported and constant currency basis. Q2 total expenses were $27.1 billion, up 12% compared to last year. In terms of the specific line items: Cost of revenue increased 16%, driven mostly by higher infrastructure costs and payments to partners, partially offset by a benefit from the previously announced extension of server useful lives. R&D increased 23%, mostly due to higher employee compensation and infrastructure costs. Marketing & Sales increased 9%, primarily due to an increase in professional services related to our ongoing platform integrity efforts as well as marketing costs, partially offset by lower employee compensation. G&A decreased 27%, driven mostly by lower legal-related costs. We ended Q2 with over 75,900 employees, down 1% quarter-over-quarter as the vast majority of the employees impacted by performance-related reductions earlier this year were no longer captured in our headcount. This was partially offset by continued hiring in priority areas of monetization, infrastructure, Reality Labs, AI, as well as regulation and compliance. Second quarter operating income was $20.4 billion, representing a 43% operating margin. Our tax rate for the quarter was 11%, which reflects excess tax benefits from share based compensation due to the increase in our share price versus prior periods. Net income was $18.3 billion or $7.14 per share. Capital expenditures, including principal payments on finance leases, were $17.0 billion, driven by investments in servers, data centers and network infrastructure. Free cash flow was $8.5 billion. We repurchased $9.8 billion of our Class A common stock and paid $1.3 billion in dividends to shareholders. We also made $15.1 billion in non-marketable equity investments in the second quarter, which includes our minority investment in Scale AI along with other investment activities. We ended the quarter with $47.1 billion in cash and marketable securities and $28.8 billion in debt. Our community across the Family of Apps continues to grow, and we estimate more than 3.4 billion people used at least one of our Family of Apps on a daily basis in June. Q2 Total Family of Apps revenue was $47.1 billion, up 22% year-over-year. Q2 Family of Apps ad revenue was $46.6 billion, up 21% or 22% on a constant currency basis. Within ad revenue, the online commerce vertical was the largest contributor to year-over-year growth. On a user geography basis, ad revenue growth was strongest in Europe and Rest of World at 24% and 23%, respectively. North America and Asia-Pacific grew 21% and 18%. In Q2, the total number of ad impressions served across our services increased 11%, with growth mainly driven by Asia-Pacific. Impression growth accelerated across all regions due primarily to engagement tailwinds on both Facebook and Instagram and, to a lesser extent, ad load optimizations on Facebook. The average price per ad increased 9%, benefiting from increased advertiser demand, largely driven by improved ad performance. Pricing growth slowed modestly from the first quarter due to the accelerated impression growth in Q2. Family of Apps other revenue was $583 million, up 50%, driven by WhatsApp paid messaging revenue growth as well as Meta Verified subscriptions. We continue to direct the majority of our investments toward the development and operation of our Family of Apps. In Q2, Family of Apps expenses were $22.2 billion, representing 82% of our overall expenses. Family of Apps expenses were up 14%, mainly due to growth in employee compensation and infrastructure costs, partially offset by lower legal-related costs. Family of Apps operating income was $25.0 billion, representing a 53% operating margin. Within our Reality Labs segment, Q2 revenue was $370 million, up 5% year-over-year due to increased sales of AI glasses, partially offset by lower Quest sales. Reality Labs expenses were $4.9 billion, up 1% year-over-year driven by higher non-headcount related technology development costs. Reality Labs operating loss was $4.5 billion. Turning now to the business outlook. There are two primary factors that drive our revenue performance: our ability to deliver engaging experiences for our community, and our effectiveness at monetizing that engagement over time. On the first, daily actives continue to grow across Facebook, Instagram and WhatsApp as we make additional improvements to our recommendation systems and product experiences. We continue to see momentum with video engagement in particular. In Q2, Instagram video time was up more than 20% year-over-year globally. We're seeing strong traction on Facebook as well, particularly in the US where video time spent similarly expanded more than 20% year-over-year. These gains have been enabled by ongoing optimizations to our ranking systems to better identify the most relevant content to show. We expect to deliver additional improvements throughout the year as we further scale up our models and make recommendations more adaptive to a person's interests within their session. Another emphasis of our recommendations work is promoting original content. On Instagram, over two-thirds of recommended content in the US now comes from original posts. In the second half, we'll be focused on further increasing the freshness of original posts so the right audiences can discover original content from creators soon after it is posted. We are also making good progress on our longer-term ranking innovations that we expect will provide the next leg of improvements over the coming years. Our research efforts to develop cross-surface foundation recommendation models continue to progress. We are also seeing promising results from using LLMs in Threads recommendation systems. The incorporation of LLMs are now driving a meaningful share of the ranking-related time spent gains on Threads. We're now exploring how to extend the use of LLMs in recommendation systems to our other apps. We're leveraging Llama in several other back-end processes as well, including actioning bug reports so we can identify and resolve recurring issues more quickly and efficiently. This has resulted in top-line bug reports in the US & Canada in Facebook Feed and Notifications dropping by roughly 30% over the past 10 months. The primary way we're using Llama in our apps today is to power Meta AI, which is now available in over 200 countries and territories. WhatsApp continues to be the largest driver of queries as people message Meta AI directly for tasks such as information gathering, homework assistance, and generating images. Outside of WhatsApp, we're seeing Meta AI become an increasingly valuable complement to our content discovery engines. Meta AI usage on Facebook is expanding as people use it to ask about posts they see in Feed and find content across our platform in Search. Another way we expect Meta AI will help with content discovery is through the automatic