META Stock Tumbles 11% After-Hours — Soaring AI Costs Squeeze Profits And Soft Q3 Outlook Disappoints

• Meta generated $60.80 billion in revenue for the second quarter, topping expectations.
• Earnings per share of $6.18 fell short of the $7.4 anticipated by analysts. 
• Full-year capital expenditure guidance was narrowed to $130 billion–$145 billion, raising the lower bound as heavy infrastructure investments weigh on margins. 

Meta Platforms Inc. (META) share price dropped 11% after-hours on Wednesday after the Instagram owner reported second-quarter financial results that missed profit projections, squeezed cash flows, and offered a lighter-than-expected sales forecast for the upcoming quarter.

The social media giant generated $60.80 billion in revenue for the quarter ended June 30, up slightly from analyst estimates of around $60.28 billion. However, net income dropped 13% year-over-year to $15.85 billion, resulting in diluted earnings per share of $6.18, well below Wall Street’s expected $7.22 per share. 

The bottom line was weighed down by $2.4 billion in legal charges and $1.18 billion in severance costs following workforce reductions initiated in May.

Hyperscaler Capex Squeeze

Meta’s performance highlights an industry-wide challenge facing technology "hyperscalers" aggressively deploying capital into artificial intelligence. Tech conglomerates across the sector are projected to deploy over $700 billion in capital expenditures this year to construct data centers, procure specialized hardware, and power next-generation AI models.

For Meta, this infrastructure push has constrained financial liquidity. Free cash flow contracted sharply to $784 million in the quarter, down from $8.55 billion in the same period last year.

Unlike rivals such as Alphabet (GOOGL, GOOG), Microsoft (MSFT), and Amazon (AMZN)—which operate enterprise cloud services to directly monetize computing capacity—Meta relies overwhelmingly on digital advertising on platforms like Facebook and Instagram to fund its AI initiatives. While the company has rolled out new paid features, developer access tiers, and updated models, investors remain cautious regarding the timeline for direct financial returns on these large-scale capital investments.

Meta narrowed its full-year capital expenditure outlook to between $130 billion and $145 billion, raising the bottom end of its previous forecast.

Third-Quarter Outlook

Looking ahead, Meta expects revenue for the third quarter of 2026 to fall in the range of $61 billion to $64 billion. At the midpoint of $62.5 billion, the projected range falls short of Wall Street estimates averaging around $63.15 billion to $63.2 billion. The company noted that its guidance incorporates an estimated 1% foreign exchange drag on year-over-year revenue growth based on prevailing rates.

Additionally, full-year total expenses were updated to a range of $165 billion to $169 billion, reflecting ongoing infrastructure costs and legal reserves. Despite short-term financial compression, Chief Executive Officer Mark Zuckerberg and executive leadership continue to prioritize building the underlying infrastructure and technological capabilities needed for long-term competitiveness in artificial intelligence.

META Stock: Retail View 

Retail sentiment on Stocktwits was ‘neutral’ with ‘high’ message volumes. 

A user expressed bearishness following the results, saying the company will take years to recover from current levels. 

Meta stock has lost 11% year-to-date. 

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