Meta’s AI bill swallows nearly all of its free cash flow as profit falls 14%
Meta Platforms Inc.’s shares fell more than 8% in after-hours trading today after the social networking company beat revenue expectations for its fiscal 2026 second quarter but missed badly on earnings as costs rose 55%.
For the quarter that ended on June 30, Meta reported diluted earnings per share of $6.18, down from $7.14 in the same quarter last year, on revenue of $60.80 billion, up 28%. Analysts had expected earnings of $7.22 per share on revenue of $60.24 billion, leaving the top line a modest beat and the bottom line a miss of about 14%.
Net income came in at $15.85 billion, down 14%. Income from operations was $18.78 billion, an 8% decline. Operating margin narrowed to 31% from 43% a year ago.
The cost line did the damage. Total costs and expenses rose 55%, to $42.03 billion. Research and development spending climbed 67%, to $21.66 billion, while general and administrative expenses more than doubled, to $5.61 billion, on $2.40 billion of charges tied to legal proceedings. Severance from the May headcount reduction added another $1.18 billion. That round cut about 8,000 jobs.
