Meta revenue tops $60.8B but EPS miss triggers 9% stock plunge

Meta reported Q2 revenue of $60.8B, beating estimates, but EPS of $6.18 missed the $7.14 consensus by 13 percent.

"AI is accelerating our core business today, powering our next generation of products," Chief Executive Officer Mark Zuckerberg said in the earnings release.

Metric	Actual	Consensus	Beat/Miss
Revenue	$60.8B	$60.23B	+0.9%
EPS	$6.18	$7.14	-13.4%
Ad Revenue	$59.36B	$59.07B	+0.5%
Reality Labs Op. Loss	-$4.62B	-$4.45B	-3.8%

Advertising revenue rose 27 percent to $59.36B, with ad impressions up 14 percent and average price per ad climbing 12 percent. But total costs surged 55 percent to $42.03B, weighed by $2.4B in legal-proceeding charges and $1.18B in severance expenses from May layoffs. Operating income fell 8.2 percent to $18.78B, well below the $26.11B estimate. Free cash flow plunged 91 percent to $784M as capital spending jumped 83 percent to $31.08B.

The stock dropped 9 percent in after-hours trading, extending its year-to-date decline to 10 percent. Meta guided Q3 revenue of $61B to $64B, with the $62.5B midpoint below the $63.17B consensus, and narrowed its full-year 2026 capex forecast to $130B to $145B.

Reality Labs, the division building Quest VR headsets and Ray-Ban Meta smart glasses, posted an operating loss of $4.62B on revenue of $431M. The loss exceeded the $4.45B analysts expected and widened from $4.53B a year earlier. The unit has generated more than $80B in total operating losses since late 2020, according to company filings.

Meta's user base reached a new all-time high, with 3.6B daily active people across its Family of Apps. Instagram crossed 2B daily active users, and Threads surpassed 500M monthly active users. The company employed 75,472 people at the end of June, down 1 percent from a year earlier, a figure that still includes about 8,000 workers affected by the May layoffs.

Analysts remain broadly bullish despite the miss. Bank of America rates Meta a Buy with an $835 price target, while Goldman Sachs has a Buy rating and $815 target. Needham maintains a Hold, saying it prefers to wait until the current capex cycle is over.

The EPS miss and cost surge test investor patience with Meta's AI spending strategy. The Q3 guidance midpoint below consensus suggests margin pressure will persist through year-end, with the next catalyst being the Q3 earnings report in October.

This article is for informational purposes only and does not constitute investment advice.