Meta Misses Earnings Expectations Amid Legal Costs and High Capital Expenditures
Meta Platforms (NASDAQ:META) reported second-quarter earnings per share (EPS) of $6.18, missing the consensus estimate of $7.22 by 14%. The shortfall was attributed to a $2.40 billion charge for legal expenses and severance costs from an 8,000-employee reduction. Free cash flow plummeted 91% year over year due to capital expenditures (capex) reaching $30 billion in Q2, compressing operating margins by 12 percentage points. Despite a strong revenue increase of 27.96% to $60.80 billion driven largely by advertising growth and pricing power, Meta now faces skepticism around the return on its AI investments. The company must demonstrate that WhatsApp and Instagram's AI agents can generate high-margin enterprise SaaS revenue while also showing capex discipline under CEO Mark Zuckerberg. Analysts remain cautiously optimistic with 57 'Buy' ratings but are watching closely for signs of margin expansion, reduced capital intensity, or early Business AI monetization. The stock has fallen sharply in recent months and is trading at a discount relative to peers.
Topics: AI Investment Capital Expenditure Earnings Miss Meta