Meta Platforms delivered 28% revenue growth in the second quarter of 2026, but its accelerating spending on artificial-intelligence infrastructure left free cash flow almost depleted and prompted a sharp after-hours share decline. The company reported $60.801 billion in revenue for the quarter ended June 30, while capital expenditures reached $31.08 billion and free cash flow fell 91% from a year earlier to $784 million.
Meta shares dropped more than 6.37% after the results and touched $548.30 in after-hours trading. The reaction followed a difficult run into earnings: the stock had declined for 10 consecutive sessions and lost roughly 13% of its market value since July 15.
The results show that Meta’s advertising business remains capable of generating substantial cash, yet the company is committing much of that cash to data centers, servers and other computing capacity needed for its AI products. Its updated 2026 capital-expenditure outlook now stands at $130 billion to $145 billion, with the lower end raised from a prior $125 billion estimate.
Profit declines as costs rise faster than sales
Meta reported net income of $15.848 billion, down 14% year over year, or diluted earnings per share of $6.18. Total costs and expenses increased 55% to $42.026 billion, nearly twice the company’s revenue growth rate.
The quarter included a $3.58 billion non-operating charge. Meta said $2.40 billion of that amount was related to legal matters, while $1.18 billion was linked to severance costs from a restructuring launched in May that affected about 8,000 roles.
Research and development spending rose 67% from a year earlier to $21.7 billion. That increase places AI development at the center of Meta’s cost structure, extending beyond consumer-facing tools such as recommendation systems and generative AI features into the physical infrastructure needed to train and operate large models.
Operating cash flow remained high at $31.86 billion, suggesting Meta’s core operations are still producing substantial funds. Yet the company spent nearly the same amount on capital projects during the quarter, leaving little cash after investment spending. Free cash flow had been $8.55 billion in the comparable quarter a year earlier.
Meta’s headcount stood at 75,472 on June 30, down 1% year over year. The modest workforce reduction contrasts with the rapid increase in spending, underlining that the company’s investment cycle is increasingly concentrated in chips, power, land, construction and data-center equipment rather than employee expansion.
Advertising business continues to expand
The pressure on profit did not come from a slowdown in Meta’s main business. Advertising demand rose in both volume and pricing during the quarter, according to the company.
Ad impressions across Meta’s apps increased 14% year over year, while the average price per ad rose 12%. The combination gave Meta a strong revenue base even as it faced much heavier spending.
Its Family of Apps segment reached average daily active people of 3.60 billion in June, up 3% from a year earlier. Meta also said Instagram passed 2 billion daily active users during the quarter, while Threads reached 500 million monthly active users.
Those audience figures give Meta a large distribution network for AI-enhanced advertising products. Better targeting, automated creative tools and recommendation systems could support ad pricing and engagement, though the company’s current spending levels mean those gains will be measured against a rapidly rising infrastructure bill.
Reality Labs, Meta’s virtual and augmented reality division, generated $431 million in revenue, compared with $370 million a year earlier. Its operating loss widened to $4.620 billion from $4.53 billion. Meta said cumulative operating losses at Reality Labs have reached about $85.6 billion since 2021.
The unit remains small beside the advertising operation, but its persistent losses add to scrutiny of Meta’s capital allocation as AI spending intensifies.
Data-center commitments reshape Meta’s spending outlook
Meta detailed several large infrastructure projects during the quarter. The company disclosed a joint venture with BlackRock for a data-center facility near El Paso, Texas, with total development costs of about $14 billion.
It also expanded a Louisiana project expected to exceed $50 billion in regional investment and announced plans to spend more than C$13 billion on its first data center in Alberta, Canada. Such projects require long construction timelines and substantial power capacity, meaning the cash demands may extend well beyond the current fiscal year.
For the third quarter, Meta forecast revenue of $61 billion to $64 billion. The midpoint of $62.5 billion was below the Wall Street average estimate of roughly $63.1 billion and assumes currency movements will reduce revenue by about 1%.
The forecast implies year-over-year revenue growth of around 19% to 25%, below the 28% rate reported for the second quarter. Meta also lifted its full-year expense outlook to $165 billion to $169 billion, reflecting the legal charge and continued infrastructure expansion. The company expects an effective tax rate of 15% to 17% in the second half.
Tech spending could influence risk appetite
Meta’s figures add to a broader market question around whether the largest technology companies can sustain exceptional AI investment without weakening cash generation and profit growth. With the Nasdaq 100 trading at a trailing price-to-earnings ratio of 35.2, according to the supplied market data, disappointing spending discipline could weigh on valuations across growth-oriented equities.
That backdrop can affect cryptocurrency markets indirectly. Bitcoin and other digital assets have often traded alongside technology shares during periods when traders are responding to changes in liquidity, rates and risk appetite. A weaker response to major technology earnings would not determine cryptocurrency prices, but it could contribute to more volatile conditions for assets already sensitive to macroeconomic expectations.
The Federal Reserve’s balance sheet was roughly $6.7 trillion, while the latest U.S. consumer price index reading in the supplied data showed annual inflation at 3.5%. Upcoming central-bank decisions, along with evidence on technology-sector spending and corporate cash flows, are likely to remain relevant inputs for traders assessing risk across equities and digital assets.
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