Meta Posts Record Revenue But Still Faces Sell-Off; AI Spending Remains Major Point of Contention

After the close of U.S. Eastern Time on Wednesday, Meta released its second-quarter financial results. The company reported Q2 revenue of $60.8 billion, up 28% year-over-year and exceeding market expectations. Earnings per share came in at $6.18, below both forecasts and the $7.14 recorded in the same period last year. Net profit dropped to $158.5 billion from $183.4 billion, a 14% year-over-year decline. Following the earnings release, Meta’s share price saw a notable pullback in after-hours trading. Its core advertising business remained robust: Q2 ad revenue hit approximately $59.36 billion, growing 27% year-over-year. Meta’s Family of Apps (Facebook, Instagram, WhatsApp, Threads) recorded 3.6 billion daily active users, with Instagram’s daily active users reaching 2 billion and Threads’ monthly active users rising to 500 million. The expanding app portfolio continues to support high growth in Meta’s advertising segment. However, the market is more focused on costs and cash flow. Meta’s total costs and expenses in Q2 rose to $42.03 billion, surging 55% year-over-year, including legal fees and severance costs. Spending on AI infrastructure kept expanding, with capital expenditures reaching $31.08 billion, up 83% year-over-year. Free cash flow fell to $784 million from $8.55 billion in the year-ago period. The company also revised its full-year capital expenditure guidance to a range of $130 billion to $145 billion. D.A. Davidson maintained its "Buy" rating on Meta but cut its price target from $850 to $700, citing slower growth indicated in Meta’s Q3 revenue guidance. Aptus Capital also noted that the lower end of Meta’s capital expenditure range was raised without a corresponding stronger revenue guidance. Going forward, the market will closely monitor whether Meta’s Q3 revenue can reaccelerate, and whether its AI ad tools, AI assistants, and computing power business can deliver clear returns.