Meta Platforms reported Q2 2026 earnings Wednesday evening that beat on revenue and missed badly on profit, sending shares down more than 7 percent in after-hours trading.
Revenue of $60.8 billion grew 28 percent year over year and cleared the $60.2 billion consensus.
EPS of $6.18 missed the $7.22 estimate by 14 percent, the steepest EPS miss Meta has delivered in years.
The culprit is two specific line items. A $2.4 billion charge for legal proceedings, primarily related to youth social media litigation, and $1.18 billion in severance expenses from the May 2026 layoffs combined for $3.58 billion in one-time costs that torpedoed the bottom line.
Meta's own CFO Susan Li said on the call that stripping those two items out, operating income would have risen 9 percent year over year rather than falling 8 percent. The business itself was fine. The charges were the story.
The second concern is capital expenditure. Meta raised its full-year 2026 capex guidance to $130 to $145 billion, up again, while free cash flow collapsed to $784 million for the quarter from $8.55 billion a year earlier.
Investors who have been pressing Zuckerberg for proof that $100-plus billion in AI spending will generate returns saw another quarter where the spending grew faster than the profits. Q3 revenue guidance of $61 to $64 billion also missed the $63.1 billion consensus midpoint.