Meta shares fall after profits drop and sales forecast misses estimates

In short: Meta’s stock fell after the company reported lower profits and gave a weaker sales forecast, while continuing to spend heavily on AI.

What happened

Meta, the company behind Facebook and Instagram, reported results for its second quarter. Revenue rose 28% to $60.8bn, which was slightly above what analysts expected.

Profit told a different story. Meta said net income, which is the money left after paying all costs, fell 14% to $15.8bn. Analysts had expected $18.5bn.

Meta’s costs jumped. The company said costs and expenses rose 55% to $42bn. Meta also pointed to $2.4bn in charges linked to legal proceedings that were recorded in the quarter.

Investors also focused on Meta’s outlook for the next quarter. The company projected sales of $61bn to $64bn, with the midpoint below analysts’ estimate of $63.1bn. Meta shares fell about 5% in after-hours trading.

A big reason costs are rising is Meta’s spending on AI infrastructure. That includes data centres, which are large buildings full of computers (like warehouses for computing power). Meta has been trying to compete with other tech companies in AI, but it does not have a large cloud business that rents out those data centres to other companies.

Meta said earlier this year it expected 2026 capital spending of $125bn to $145bn. It has now narrowed that to $130bn to $145bn.

Why it matters

Meta is choosing to spend heavily now in the hope that AI will bring in more money later. The market is watching closely because that plan can squeeze profits in the short term, even if sales keep growing.

Source: Financial Times