Meta Platforms shares tumbled in late trading Wednesday after massive capital outlays for artificial intelligence and a significant legal provision nearly exhausted the company’s liquid surplus. Despite a healthy increase in quarterly revenue, the social media giant’s free cash flow plummeted by 91%, unsettling investors.
Following the financial update, the stock price slid to roughly $529 in the after-hour trading session, representing a 10% decline from previous levels. This sell-off was triggered by a bottom-line performance that failed to meet market forecasts; earnings of $6.18 per share fell significantly short of the $7.10 to $7.23 range anticipated by analysts. Net profit for the period dropped 14% to $15.85 billion as the firm’s operating margins contracted from 43% to 31% compared to the prior year.
The profit squeeze resulted from a 55% leap in total operating costs, which reached $42.03 billion. Key contributors to this spike included a $2.4 billion reserve for unnamed legal disputes and $1.18 billion in costs related to a workforce reduction initiated in May 2026. Furthermore, research and development spending swelled 67% to $21.66 billion as the company accelerated its AI hardware and data centre roadmap.
This aggressive expansion led to $31.08 billion in capital expenditures, leaving only $784 million in free cash flow—a sharp decline from the $8.55 billion recorded in the same quarter of 2025. To maintain its balance sheet and fund shareholder returns, such as the $1.35 billion paid in dividends, Meta secured $25 billion in new long-term debt during the period. Total debt obligations now stand at $83.66 billion.
Operational metrics remained a bright spot, with total revenue growing 28% to $60.8 billion, driven primarily by a 27% increase in advertising sales. User engagement also improved, with daily active users across its applications rising to 3.6 billion in June. Conversely, the Reality Labs division continued to weigh on results, posting a $4.62 billion deficit on minimal sales of $431 million.
For the third quarter of 2026, Meta projects revenue between $61 billion and $64 billion, placing the midpoint below current analyst expectations. The company also adjusted its full-year spending outlook, raising the floor for capital investments to a range of $130 billion to $145 billion. Chief Executive Mark Zuckerberg maintained that these infrastructure investments are essential for the next generation of products and future enterprise opportunities.
