Meta postQ: Revenue tops expectations but AI costs weigh on profitability

Meta Platforms Inc. (NASDAQ: META) delivered another strong quarter, surpassing Visible Alpha consensus expectations on both revenue and profitability as its core advertising business continued to benefit from AI-driven improvements in engagement and ad targeting. However, the results were accompanied by another significant increase in the company's infrastructure spending plans as Meta continues to invest aggressively in AI data centers and computing capacity.

The Family of Apps business remained the primary growth engine, while Reality Labs’ losses widened as expenses in next-generation AI and mixed reality technologies continued. Management also raised its capital expenditure outlook, underscoring that AI infrastructure remains the company's top strategic priority despite increasing investor focus on spending discipline.

Looking at earnings summaries compiled by S&P Global Pronto NLP, together with Visible Alpha pre-quarter consensus expectations and revised outlook, here are the key takeaways.

Key takeaways

Revenue beat: Q2 revenue rose 28% year-over-year to $60.8 billion, 1% above Visible Alpha consensus expectations.

Family of Apps continued to drive growth: Revenue increased 28% to $60.4 billion, modestly ahead of consensus expectations, as AI-powered recommendations improved engagement and ad performance. Reality Labs revenue also exceeded consensus but remained a small contributor.

Profitability under pressure: Total expenses increased 55.2% year-over-year to $42 billion, 8.4% above consensus expectations, as Meta accelerated spending on AI infrastructure and computing capacity. Operating income, net income and diluted EPS missed expectations by 12.6%, 14.2% and 14.0%, respectively.

Engagement remained healthy: Daily active users across Meta's key regions were broadly in line with or slightly ahead of expectations.

Cash flow: Operating cash flow continued to support Meta's elevated investment in AI infrastructure.

Guidance 

Q3 revenue guidance of $61 billion-$64 billion remained broadly in line with Visible Alpha consensus preQ estimates.

FY2026 capital expenditure guidance was raised to $165 billion-$169 billion, reflecting faster investment in AI infrastructure and higher prices for memory.

Management reiterated that AI investment remains its top strategic priority and expects operating income to increase year-over-year despite higher spending.

Consensus revisions

Analysts have modestly raised revenue expectations following the earnings release but lowered profitability forecasts as Meta's increased AI investment outlook point to higher near-term costs.

Visible Alpha consensus shows analysts now expect Q3 revenue of $63.2 billion, up 0.2% from pre-quarter estimates, while FY2026 revenue estimates have increased by 0.3% to $253.9 billion.

Analysts have also raised expectations for spending, with FY2026 expense estimates increasing 2.5% and capital expenditure forecasts rising 1.9%.

Profitability estimates have moved lower, with FY2026 operating income, net income and diluted EPS expectations now lower than previously forecasted, reflecting the impact of higher AI infrastructure investments.

Share price reaction 

Meta shares declined following the results as weaker-than-expected profit performance and higher AI infrastructure spending overshadowed advertising growth.

This article was published by Visible Alpha, part of S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.