Meta shares dropped more than 6% in extended trading on Wednesday after second-quarter earnings per share missed analyst estimates and the company guided current-quarter revenue below Wall Street's forecast. Free cash flow fell to $784 million from $8.55 billion a year earlier as Meta poured money into artificial intelligence infrastructure.
Meta shares dropped more than 6% in extended trading on Wednesday after the company issued a weaker-than-expected revenue forecast and took a big hit to its cash pile. Earnings per share came in at $6.18 against the $7.22 expected by analysts polled by LSEG, while revenue was $60.80 billion against their $60.17 billion estimate.
The company expects revenue this quarter of between $61 billion and $64 billion, or $62.5 billion at the middle of the range, against the $63.15 billion analysts were expecting, according to LSEG. That forecast assumes foreign currency is an approximately 1% headwind to year-over-year total revenue growth, based on current exchange rates.
Meanwhile, shares are down 11% for the year as of Wednesday's close, while the Nasdaq is up about 5% over that stretch.
Free cash flow dwindles to $784 million
Free cash flow fell to $784 million in the quarter from $8.55 billion a year earlier, with Meta pouring money into AI infrastructure. For capital expenditures, the company narrowed its guidance for the year to between $130 billion and $145 billion from a prior range of $125 billion to $145 billion.
Meta also raised the lower end of its expense outlook, with 2026 total expenses now forecast between $165 billion and $169 billion, the Financial Times reported.
Costs and expenses climb 55%
Second-quarter total costs and expenses came in at $42.03 billion, an increase of 55% from a year ago. That figure includes $2.4 billion of charges related to legal proceedings and $1.18 billion of severance expenses in connection with layoffs that began in May.
Finance chief Susan Li said on the call that, excluding those charges, operating income would have increased 9% year over year. Net income slid to $15.85 billion from $18.34 billion, or $7.14 per share, in the same quarter last year.
Reality Labs loses $4.6 billion
The Reality Labs unit generated $4.6 billion in second-quarter operating losses while bringing in $431 million in sales. Wall Street was expecting the unit, which develops virtual reality and related AI-powered wearable devices, to record a loss of $5.07 billion on revenue of $423.4 million.
Daily active people, which measures users of Meta's family of apps, came in at 3.6 billion, trailing Wall Street estimates of 3.61 billion, according to StreetAccount.
Unlike Alphabet and fellow hyperscalers Amazon and Microsoft, Meta doesn't have a thriving cloud-computing business — and that could be changing as it looks to lease out excess capacity to third parties. Chief executive Mark Zuckerberg said on the call that Meta is receiving offers for its compute: "We're getting a lot of offers for compute at a significant premium".
Sources: CNBC, Financial Times
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