Meta’s Profit Falls 14% Even as Revenue Jumps 28% on Record AI Spending

Meta Platforms posted a 28% jump in second-quarter revenue to $60.8 billion, but net income fell 14% and shares dropped more than 9% in after-hours trading after the company raised its 2026 capital spending forecast to as much as $145 billion. The results underscore a widening rift on Wall Street over how long investors will keep funding Big Tech’s AI buildout before it pays off.

What to know:

• Revenue hit $60.8 billion, up 28% year-over-year, beating Wall Street estimates.
• Net income fell 14% to $15.8 billion, or $6.18 per share, missing analyst expectations.
• Capital expenditures hit $31.1 billion in the quarter alone, part of a spending pace that pushed total costs up 55% to roughly $42 billion.
• Meta raised its full-year 2026 capex guidance to a range of $130 billion to $145 billion, up from $72.2 billion spent in 2025.
• The quarter included a $2.4 billion legal charge and $1.18 billion in severance tied to the May 2026 layoff of about 8,000 employees.
• Meta guided Q3 revenue to a range of $61 billion to $64 billion, signaling continued growth despite rising costs.

Meta’s second-quarter results capture a tension that has come to define the AI era on Wall Street: explosive revenue growth colliding with an even faster rise in spending. The company, led by chief executive Mark Zuckerberg, said advertising revenue climbed 27% as its AI-driven ad-targeting tools improved click-through rates across Facebook, Instagram and its other apps. The company’s Family of Apps segment, which houses its social platforms, reported that daily active people averaged 3.60 billion in June, reinforcing that Meta’s core user base keeps expanding even as the company pours resources into artificial intelligence infrastructure.

That growth, however, was overshadowed by the scale of Meta’s capital spending. The company’s capital expenditures for the quarter reached $31.1 billion, largely funneled into data centers, custom AI chips and the power infrastructure needed to train and run increasingly large models. Executives told investors on the earnings call that the buildout is necessary to remain competitive with rivals including Google, Microsoft and Amazon, all of which have similarly ramped up AI infrastructure spending over the past year. But the guidance increase, from a previous range of $125 billion-$145 billion to a firmer $130 billion-$145 billion for the full year, still rattled investors who had hoped for signs of spending discipline.

The market reaction was swift. Shares fell more than 9% in extended trading, erasing tens of billions of dollars in market value in a matter of minutes, as investors weighed the widening gap between AI investment and any clear near-term payoff. Meta’s Q2 net income of $15.8 billion marked a 14% year-over-year decline, driven in part by a $2.4 billion charge tied to ongoing legal proceedings and $1.18 billion in severance costs stemming from the company’s May 2026 decision to cut approximately 8,000 jobs, primarily across its non-AI product teams.

Despite the profit miss, Meta’s outlook remains upbeat. The company guided third-quarter revenue to a range of $61 billion to $64 billion, which would represent continued double-digit growth. Chief financial officer Susan Li reiterated that 2027 capital expenditure growth would also be significant, suggesting the current spending cycle is far from over. That commitment reflects a broader industry-wide bet that whoever builds the most powerful AI infrastructure first will capture outsized advertising, cloud and enterprise revenue in the years ahead.

Still, the scale of the spending has become a flashpoint for skeptics who argue that AI capital expenditure across the technology sector is outpacing demonstrable returns. Meta is far from alone: rival tech giants have collectively pledged hundreds of billions of dollars in AI infrastructure spending for 2026, and any sign of slowing ad revenue or delayed AI monetization could pressure the entire sector’s valuations. For now, Meta’s leadership is betting that the payoff from smarter ad-targeting, new AI-powered products and eventual enterprise AI tools will justify the near-term hit to profitability — a bet that Wall Street’s after-hours sell-off suggests investors are not yet fully ready to accept.