Investors punished Meta’s $145 billion AI spending plan as EPS missed estimates by 13% and costs surged 55%.
Meta Platforms shares plunged 9% in early trading to $530 after reporting Q2 earnings that fell short of expectations. The company’s diluted EPS of $6.18 missed the $7.14-$7.22 range by 13%, while total costs surged 55% to $42 billion, driven by $2.4 billion in legal charges and $1.18 billion in severance costs.
Revenue for the quarter reached $60.8 billion, beating the $60.2 billion consensus, with advertising revenue at $59.3 billion. However, free cash flow neared zero, raising concerns about the sustainability of Meta’s $145 billion capital expenditure plan for AI infrastructure. The company also raised the low end of its 2026 expense forecast.
Wall Street responded swiftly, with ten firms slashing price targets overnight. Wells Fargo cut its target from $835 to $640, citing limited visibility into AI monetization beyond advertising. The stock is now down 16% over the past year and 11% year-to-date.