Meta beats revenue but misses earnings; raises AI spending to $145B

Meta Platforms reported second-quarter revenue of $60.8 billion on Wednesday, exceeding Wall Street expectations of $60.2 billion, but earnings per share fell significantly short at $6.18 versus the forecast of $7.14. The earnings miss was driven by $2.4 billion in legal charges and $1.18 billion in severance costs tied to approximately 8,000 employee layoffs announced in May 2026. Operating income fell roughly 8 percent year-over-year to $18.78 billion, while the operating margin narrowed to 31 percent from 43 percent. Total costs and expenses surged 55 percent to $42.03 billion.

The company raised its 2026 capital expenditure range to $130–$145 billion, increasing the lower bound from $125 billion to fund AI infrastructure development. Meta also announced a $14 billion joint data center project in Texas with BlackRock, in which BlackRock will hold an 80 percent stake and Meta will retain 20 percent. CEO Mark Zuckerberg stated that "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," emphasizing AI's role in future growth. The company's free cash flow dropped 91 percent to $784 million from $8.55 billion a year earlier.

For the third quarter, Meta forecast revenue between $61 billion and $64 billion—below the $63.14 billion midpoint analysts expected. The company also raised its full-year expense forecast to $165–$169 billion. Meta's daily active users across its family of apps (Facebook, Messenger, Instagram, WhatsApp, and Threads) reached 3.6 billion, growing 3 percent year-over-year. Instagram reached 2 billion daily users during the quarter, and Threads achieved 500 million monthly active users. Advertising revenue came in at $59.3 billion versus analyst expectations of $59.07 billion, with ad impressions up 14 percent and average price per ad up 12 percent.

Meta stock fell approximately 8 percent immediately following the earnings announcement, closing down 4.2 percent in after-hours trading at $560.85. Analysts noted that Meta's massive AI infrastructure spending differs from competitors like Alphabet and Microsoft, which have established cloud businesses generating direct revenue from their data center infrastructure. Meta is reportedly developing a cloud business to sell AI compute and excess computing capacity to outside customers. The company also launched its Llama 1.1 model with aggressive pricing—$1.25 per million input tokens and $4.25 per million output tokens—significantly undercutting OpenAI and Anthropic pricing.

Investors are scrutinizing whether Meta's substantial AI investments will generate returns, particularly given the company's shift toward leaner operations and reduced workforce. Zuckerberg launched a media campaign ahead of earnings, including op-eds in the Wall Street Journal and interviews with major publications, to promote his vision of AI-powered "personal superintelligence" accessible to everyone. Some analysts question the contrast between this optimistic messaging and persistent controversies surrounding social media's impact on youth and data privacy. The company's strategic bet on AI represents a cultural and organizational transformation, with Zuckerberg replacing management layers with smaller, AI-focused teams and what one analyst described as "trading people for compute."