Meta Platforms, the parent company of Facebook and Instagram, saw its stock tumble sharply this week. Shares fell approximately nine percent after the company reported disappointing second-quarter earnings. Although revenue had grown 28 percent to $60.8 billion, earnings per share came in well below expectations. The company posted $6.18 per share, missing the analyst estimate of roughly $7.22. This marked the first earnings miss in six consecutive quarters.
The primary culprit behind the shortfall was a dramatic surge in costs and expenses. Total expenses climbed 55 percent to $42 billion, compressing the operating margin from 43 to 31 percent. Meta had taken $2.4 billion in charges related to legal proceedings during the quarter. Additionally, $1.18 billion in severance costs resulted from the layoff of approximately 8,000 employees. These workforce reductions were part of a companywide shift to prioritize artificial intelligence.
Investors have grown increasingly wary of the enormous sums being poured into AI infrastructure. Meta narrowed its full-year capital expenditure forecast to between $130 billion and $145 billion. This figure nearly doubles the $72.2 billion the company had spent in 2025. Free cash flow has declined significantly as a result of these investments. Had the company controlled its spending more cautiously, its stock might have avoided such volatility.
Despite these concerns, CEO Mark Zuckerberg remains optimistic about Meta's long-term AI strategy. He stated that AI is accelerating the core business and opening new enterprise opportunities. Wall Street analysts broadly lowered their price targets but maintained their buy ratings on the stock. Some analysts view the post-earnings pullback as a potential entry point for long-term investors. The coming quarters will reveal whether Meta's massive AI bet ultimately delivers compelling returns.
