The news
Meta Q2 2026 earnings, reported by Meta Platforms (META) on July 29, 2026, showed revenue up 28% to $60.80 billion while net income fell 14% as costs climbed 55%. It also narrowed its 2026 capital spending outlook to $130 billion to $145 billion.
Costs and expenses reached $42.03 billion, including $2.40 billion of charges related to legal proceedings and $1.18 billion of severance tied to the headcount reduction Meta made in May 2026, which affected about 8,000 employees. Operating income fell 8% to about $18.8 billion, and the operating margin dropped to 31% from 43% a year earlier. Chief Financial Officer Susan Li said on the earnings call that operating income would have risen 9% excluding those charges, CNBC reported.
Advertising carried the quarter. Ad revenue rose 27% to $59.36 billion, as ad impressions grew 14% and the average price per ad rose 12%. Family daily active people, Meta's count of users across its apps, averaged 3.60 billion in June, up 3%. Reality Labs, the virtual and augmented reality unit, lost $4.62 billion on $431 million of revenue.
Capital expenditures, including principal payments on finance leases, were $31.08 billion in the quarter, and free cash flow shrank to $784 million from $8.55 billion a year earlier. Meta ended June with $90.26 billion in cash, cash equivalents and marketable securities and $83.66 billion of long-term debt.
For the third quarter, Meta forecast revenue of $61 billion to $64 billion. It raised the low end of its full-year expense outlook to include the legal charges, now expecting $165 billion to $169 billion, and narrowed capex from a prior range of $125 billion to $145 billion. Meta also warned that youth-related trials scheduled in the US this year may ultimately result in a material loss.
Earnings per share of $6.18 missed the $7.22 that analysts polled by LSEG expected, while revenue beat the $60.17 billion estimate, according to CNBC, which reported that Meta shares slid in extended trading. CEO Mark Zuckerberg said on the call that Meta was getting offers for compute "at a significant premium over what we paid for it."
The numbers
- Revenue
- $60.80 billion, up 28%
- Net income
- $15.85 billion, down 14%
- Diluted EPS
- $6.18 (vs. $7.14 a year earlier)
- Legal charges in the quarter
- $2.40 billion
- Severance
- $1.18 billion
- Q2 capex (incl. finance lease principal)
- $31.08 billion
- Free cash flow
- $784 million (vs. $8.55 billion)
- 2026 capex outlook
- $130-145 billion (was $125-145 billion)
- 2026 total expense outlook
- $165-169 billion
- Q3 revenue outlook
- $61-64 billion
Why CEOs should care
For marketing leaders, the key line is pricing: Meta delivered 14% more ad impressions at an average price per ad 12% higher than a year earlier. Budget owners should check whether their own cost per result on Facebook and Instagram is rising at a similar pace, and whether Meta's AI-driven targeting is delivering enough extra conversions to justify it.
For CFOs and buyers of AI capacity, Meta's plan to spend up to $145 billion in 2026 means one company is competing for the same chips, power and construction capacity that cloud providers and enterprises need. Zuckerberg's remark about offers for compute also hints that Meta could become a seller of spare capacity. Procurement teams negotiating multi-year compute deals should track whether that adds a new supplier.
For boards, the quarter shows legal risk moving straight into operating results: $2.40 billion of charges in one quarter, plus a warning that youth-related trials may cause a material loss. Directors of consumer platforms should ask how product-safety litigation is reserved for and how it would change guidance.
The bigger picture
Meta's quarter fits a wider pattern of AI spending squeezing cash at the largest platforms. CNBC noted that Alphabet had reported the prior week that its free cash flow turned negative for the first time on record because of AI spending, and that Meta, unlike Alphabet, Amazon and Microsoft, lacks a large cloud business to rent out what it builds.
Meta is also looking for other ways to fund and use its build-out. On July 28, the day before the results, it announced a venture with BlackRock for a $14 billion data center project in El Paso, Texas. Earlier in July it released its Muse Spark 1.1 model, part of an effort investors are watching to earn more directly from AI, CNBC reported.
What happened next
On August 26, 2026, Meta settled a federal case brought by a coalition of state attorneys general over harm to young users. Meta said the agreement includes a payment of approximately $18 billion in annual installments over 10 years, and that it expects to accrue a legal expense of approximately $10 billion in the third quarter of 2026, CNBC reported. CNBC said that expense had not previously been taken into account.
Next to watch: Meta's results for the quarter ending September 30, which will show how that charge and the capex pace affect the $165 billion to $169 billion expense outlook and free cash flow.
