Meta Stock Sinks 10% as Earnings Raise New Worries -- Barrons.com

By Nate Wolf

A disappointing earnings report looked set to knock Meta Platforms off course as it struggles to get Wall Street's buy-in on its massive artificial-intelligence spending.

Investors wanted more details on Meta's AI strategy when the social-media giant reported second-quarter results on Wednesday. Instead, they got weaker-than-expected earnings and a warning about potential legal troubles.

Meta stock dropped 9.4% in late trading. Heading into the earnings print, shares were down 11% this year.

Revenue in the second quarter jumped 28% year over year to a record $60.8 billion, surpassing analysts' estimates of $60.2 billion, as Meta's advertising engine kept chugging along with help from AI models.

But earnings came in at $6.18 a share, down from $7.14 a year ago and below Wall Street's forecast of $7.19. The weak results reflected a $2.4 billion charge from legal proceedings, $1.2 billion in severance expenses from recent layoffs, and a 67% jump in research and development costs.

Meta's stock is inextricably linked to the return on its invested capital, or ROIC. But investors didn't get many definitive updates, with Meta instead emphasizing the flexibility of its AI investments.

The company raised the low end of its forecast for 2026 capital expenditures. It now expects capex of $130 billion to $145 billion for the year, up from an earlier range of $125 billion to $145 billion. Chief Financial Officer Susan Li declined to offer 2027 guidance.

Plans to sell data-center capacity as part of a cloud business weren't forthcoming either. CEO Mark Zuckerberg said Meta would "potentially" sell compute, adding that the company had received "a lot of offers," but made no firm commitments.

Meta's message on Wednesday was about diversifying its bets and balancing long- and short-term goals.

"You don't want to only do long-term things," Zuckerberg said. "But I also think it would be foolish to basically just sell all of the compute and take a short-term profit."

The company is building personal AI agents, launching agent and developer tools for enterprise customers, and competing with Anthropic and OpenAI in the race to build advanced frontier models.

While AI investments commanded almost all of the attention on Meta's earnings call, the company also warned that a series of lawsuits related to youth social-media use could result in material losses. Several trials are scheduled for this year in the U.S.

It wasn't immediately clear whether the $2.4 billion legal charge in the second-quarter stemmed from these cases, but any costs Meta has to bear while also making its enormous AI expenditures could add to investors existing worries around spending.

The company just managed to report a positive free cash flow -- $784 million -- in the second quarter. That number is likely to become a deficit in 2027.

Write to Nate Wolf at nate.wolf@barrons.com

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July 29, 2026 17:53 ET (21:53 GMT)