Meta Platforms' Q2 2026 revenue rose 28% to $60.8 billion, but the stock sold off as the company raised its 2026 capital-expenditure guidance to $130 billion-$145 billion. Reported EPS missed estimates, though the figure included legal and severance charges that masked an underlying beat.
Meta Platforms stock sold off for the second time this year after its latest earnings report, even though the underlying business kept growing. The core issue is not revenue — it is spending: Meta now expects 2026 capex of between $130 billion and $145 billion, up from the low end of its prior $125 billion-to-$145 billion range.
The company declined to give a 2027 capex forecast but said it plans to maximize capacity this year and next, meaning spending will likely go higher next year.
Advertising and AI power revenue growth
Meta's Q2 revenue jumped 28% year over year to $60.8 billion, above the $60.17 billion analysts polled by LSEG had expected. Advertising revenue, the company's core business, climbed 27% to $59.4 billion, while Reality Labs revenue rose 16% to $431 million.
Ad growth came from a 14% rise in ad impressions and a 12% increase in average ad price. Meta's AI-powered Advantage+ tool has grown to an annual recurring revenue run rate of over $75 billion, and more than nine million small businesses have adopted at least one of the company's generative AI creative tools.
Reported EPS misses, adjusted figure beats
Meta's reported EPS fell 13% to $6.18, missing the $7.22 analysts expected. But that figure included $2.4 billion in legal costs and nearly $1.2 billion in severance costs — excluding those charges, adjusted EPS would have been $7.35, above estimates.
Overall expenses surged 55% to $42 billion, though excluding those charges the increase was 42%. Despite the higher spending, Meta still generated $784 million in free cash flow for the quarter and $13.2 billion over the first half of the year.
Stock now trades at a lower valuation
Following the sell-off, Meta stock trades at a forward P/E of just above 14 based on 2027 analyst estimates.
Meta forecasts Q3 revenue of $61 billion to $64 billion, representing year-over-year growth of 19% to 25%, above the $63.2 billion analysts expected. Reality Labs continues to weigh on profitability, posting a $4.6 billion loss for the quarter. The June closure of its Horizon Worlds virtual-reality platform could reduce those losses going forward.
Source: Motley Fool
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