Meta reported a 14% decline in net income for the second quarter of 2026, falling to about $15.8 billion and missing market expectations [1, 2, 3]. The company's revenue, however, grew 28% year-over-year to approximately $60.8 billion, exceeding analyst estimates [1, 2, 3]. Despite the revenue increase, Meta's free cash flow plummeted 91% to just $784 million, largely driven by heavy investments in AI infrastructure that weighed on its liquidity [1, 2, 3].

Operating income declined 8.2% to $18.78 billion with the operating margin shrinking from 43% to 31% compared to the previous year [4, 5]. Total costs and expenses rose 55% year-over-year to $42.02 billion, a figure that included $2.4 billion in one-time legal charges and $1.2 billion in severance costs from layoffs conducted in May 2026 [6, 5].

Meta's Reality Labs division, focused on virtual and augmented reality, posted second-quarter revenue of $431 million, up from $370 million in the prior year. Yet its operating loss deepened to $4.62 billion from $4.53 billion, with cumulative losses surpassing $80 billion since the end of 2020 [1, 4, 7].

Daily active users totaled 3.6 billion accounts, just below the market expectation of 3.601 billion [4, 8]. Meta's advertising business remains robust, delivering 27% year-on-year growth in ad revenue to $59.36 billion, driven by ad impressions up 14% and average prices rising 12% [5].

CEO Mark Zuckerberg emphasized the strategic role of AI investments, saying, "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities" [6]. He also noted plans to rent Meta’s cloud computing power externally, reflecting a broader push into AI-driven services [6]. CFO Susan Li said the company expects clearer returns on AI investments by 2028 [9].

Meta raised its 2026 capital expenditure forecast to $130 billion-$145 billion, up from a previous lower bound of $125 billion, and adjusted its total expense guidance to $165 billion-$169 billion, up from $162 billion-$169 billion previously [1, 6, 5].

Following the earnings release on July 29, Meta’s stock fell sharply in after-hours trading by 10-11% amid investor concerns over AI spending and profit outlook [1, 6, 4, 8]. The broader tech sector also sold off after reports of heavy AI investment costs, with Alphabet posting negative free cash flow for the first time due to similar spending and Microsoft and Amazon reporting strong cloud and AI-driven growth [10, 11, 6].

Meta projects third-quarter 2026 revenue around $62.5 billion, slightly below analyst estimates near $63.15 billion [4, 12]. The company faces ongoing legal and regulatory challenges worldwide, including a California jury verdict requiring Meta and Google to pay $6 million in a childhood addiction case [6].