Meta Platforms, Inc.
META · Nasdaq
Next quarter
Reports Nov 4, 2026.
Consensus is $6.33 EPS for Sep 2026 across 13 estimates, ranging $3.14 to $7.10.
META Jun 2026
- 12.96%
- -7.95%
- $7.10
- $6.18
- —
- $60.80B
Reported results
- $60.80B
- 81.37%
- $18.77B
- 30.88%
- $15.85B
- $6.18
Highlights
- Revenue: Second-quarter revenue rose 28% year over year to $60.80 billion, with advertising revenue up 27% to $59.36 billion; revenue increased from $56.31 billion in Q1 2026.
- Earnings miss: Diluted EPS was $6.18 versus consensus of $7.10, a 12.96% shortfall; net income fell 14% year over year to $15.85 billion from $18.34 billion.
- Margin pressure: Operating income declined 8% year over year to $18.78 billion and operating margin contracted to 31% from 43%, as costs and expenses increased 55% to $42.03 billion.
- Advertising momentum: Ad impressions increased 14% and average price per ad rose 12%, while Family daily active people grew 3% year over year to 3.60 billion.
- AI investment: Research and development expense increased 67% to $21.66 billion, driven by higher compensation, data-center and cloud infrastructure costs, and third-party AI token costs.
- Capital intensity: Capital expenditures, including finance-lease principal payments, were $31.08 billion in the quarter; free cash flow fell to $784 million from $8.55 billion a year earlier.
- Legal and restructuring charges: Costs included $2.40 billion of legal-proceeding charges and $1.18 billion of severance tied to the May headcount reduction affecting approximately 8,000 employees.
- Outlook: Meta expects third-quarter revenue of $61 billion to $64 billion, full-year 2026 expenses of $165 billion to $169 billion, and capital expenditures of $130 billion to $145 billion.
Analysis
Meta's second quarter was a strong advertising quarter but a weak earnings print. Revenue of $60.80 billion grew 28% year over year and increased 8% sequentially from $56.31 billion in Q1, supported by 14% growth in ad impressions and a 12% increase in average price per ad. However, diluted EPS of $6.18 missed the $7.10 consensus by 12.96%, while net income fell 14% year over year to $15.85 billion from $18.34 billion and 41% sequentially from $26.77 billion. The result reflected a sharp increase in investment and several discrete costs rather than a deterioration in the advertising franchise alone.
The defining feature was the cost of Meta's AI buildout. Total expenses rose 55% to $42.03 billion, with R&D up 67% to $21.66 billion as infrastructure, cloud, AI token and compensation costs increased. A $2.40 billion legal charge and $1.18 billion severance charge further reduced profitability, while the tax rate rose to 16% from 11% a year earlier. Capital spending reached $31.08 billion, leaving just $784 million of free cash flow. Management guided to $61 billion-$64 billion of third-quarter revenue and raised the full-year expense range to $165 billion-$169 billion, while maintaining its expectation that 2026 operating income will exceed 2025.
Advertising engine
Meta's core advertising business remained the strongest part of the quarter. Family of Apps revenue rose 28% to $60.37 billion, including $59.36 billion of advertising revenue. The combination of more inventory and better monetization drove the increase: ad impressions rose 14% and average price per ad rose 12%.
- User base: Family daily active people averaged 3.60 billion in June, up 3% from 3.48 billion a year earlier.
- Monetization: Worldwide average revenue per person rose 24% year over year to $16.86, substantially faster than DAP growth.
- Geography: Revenue grew 32% in the United States and Canada, 24% in Europe, 19% in Asia-Pacific and 36% in the rest of the world.
- Other FoA revenue: Paid messaging and subscriptions helped other Family of Apps revenue rise 73% to $1.01 billion.
AI investment cycle
The quarter showed Meta converting AI ambitions into a much larger cost and infrastructure base. Research and development expense rose 67% to $21.66 billion, with management citing higher employee compensation, data-center and technical-infrastructure spending, third-party cloud services and AI token costs. Meta said AI is already improving content recommendations, advertising tools and engagement, but the financial return on the expanded investment remains ahead of the reported costs.
- Infrastructure: Capital expenditures were $31.08 billion in Q2, versus $17.01 billion a year earlier, and $49.11 billion in the first six months versus $29.48 billion in the prior-year period.
- Full-year spending: 2026 capital expenditures are now expected at $130 billion-$145 billion, narrowed from $125 billion-$145 billion.
- Commitments: Non-cancelable contractual commitments totaled $349.31 billion, while leases not yet commenced were approximately $278.99 billion, mostly for data centers, colocations and network infrastructure.
- Financing: Meta issued $25.00 billion of fixed-rate senior notes in May, taking long-term debt to $83.66 billion at quarter-end.
Costs and profitability
Revenue growth did not translate into operating leverage. Costs and expenses rose 55% to $42.03 billion, pushing operating margin down to 31% from 43% and operating income down 8% to $18.78 billion. The pressure came from both recurring investment and identifiable one-time charges.
- R&D: Expense increased $8.71 billion, or 67%, to $21.66 billion, and rose to 36% of revenue from 27%.
- Legal charge: General and administrative expense included $2.40 billion related to legal proceedings, contributing to a 111% increase in G&A to $5.61 billion.
- Restructuring: Employee compensation included $1.18 billion of severance related to the May reduction of approximately 8,000 employees; reported headcount was 75,472 at June 30, down 1% year over year.
- Tax: The effective tax rate increased to 16% from 11%, partly because the Corporate Alternative Minimum Tax limited certain tax benefits.
- Segment split: Family of Apps operating income fell 6% to $23.39 billion, while Reality Labs lost $4.62 billion, compared with a $4.53 billion loss a year earlier.
Cash flow and balance sheet
Meta remained profitable and generated substantial operating cash, but the AI infrastructure cycle absorbed nearly all of the quarter's operating cash generation. Operating cash flow was $31.86 billion, up 25% year over year, but free cash flow was only $784 million after capital expenditures and finance-lease payments.
- Liquidity: Cash, cash equivalents and marketable securities totaled $90.26 billion at June 30, up $8.67 billion from December 31, 2025.
- Cash conversion: Six-month operating cash flow was $64.09 billion, while six-month free cash flow was $13.17 billion versus $18.88 billion a year earlier.
- Capital return: Meta paid $1.35 billion in dividends and dividend equivalents during the quarter and made no share repurchases in the first six months.
- Restricted cash: $10.80 billion of money-market funds was restricted under infrastructure purchase agreements and is expected to be released between 2028 and 2030.
Legal and regulatory exposure
Legal costs were material in the quarter, and the filing highlighted a continuing risk of larger future charges or business restrictions. Meta recognized $2.40 billion of legal-proceeding expense in Q2 and raised the lower end of its full-year expense outlook to reflect that charge.
- Youth litigation: A New Mexico jury previously ordered a $375 million civil penalty, while the state attorney general is seeking $953 million in abatement costs and broad injunctive relief; additional trials are scheduled in the second half of 2026 and 2027.
- Upcoming proceedings: Meta cited a September 2026 New Mexico trial and a scheduled August 2026 multidistrict trial involving state attorneys general claims.
- Potential scale: Plaintiffs in the broader youth-related cases have indicated that damages, disgorgement or penalties could reach more than $1 trillion in certain matters, although outcomes remain uncertain.
- Regulatory risk: The European Commission issued preliminary findings concerning minors and potentially addictive design features, while an interim measure requires WhatsApp to offer API access to general-purpose AI providers free of charge.
Third-quarter outlook
Management expects third-quarter revenue of $61 billion-$64 billion, implying year-over-year growth of approximately 20%-26% against the $51.24 billion third quarter of 2025. The outlook assumes foreign exchange will be an approximately 1% headwind to year-over-year revenue growth. Meta continues to expect 2026 operating income to exceed 2025, but the expense and capital-spending trajectory indicates that AI investment will remain the central constraint on near-term margins and cash generation.
- Expenses: Full-year 2026 total expenses are expected at $165 billion-$169 billion, incorporating the $2.40 billion legal charge.
- Taxes: The effective tax rate for the remaining quarters is expected at 15%-17%, above the prior 13%-16% outlook.
- Reality Labs: Full-year 2026 Reality Labs operating losses are expected to remain similar to 2025; Q2 revenue was $431 million and the operating loss was $4.62 billion.
