Meta reported Q2 2026 earnings on July 29, missing analyst expectations and sending shares down as much as 10 percent in after-hours trading. The company posted earnings per share of $6.18 against forecasts of $7.18, disappointing Wall Street on the bottom line while facing tough questions about its massive artificial intelligence spending.

Cash Flow Collapse

Free cash flow dropped 91 percent to $784 million from $8.55 billion a year earlier, marking the lowest level in years. Costs surged 55 percent to $42 billion, driven by a $2.4 billion legal settlement, $1.18 billion in severance tied to an 8,000-employee reduction in May, and massive spending on AI infrastructure. The deteriorating cash position rattled investors who worry about the sustainability of Meta capital spending binge.

Ad Revenue Strength Masks Expense Concerns

Advertising revenue climbed 27 percent to $59.36 billion, and Family of Apps daily active people reached 3.6 billion, up 3 percent. These metrics showed the core business remained robust. But operating income fell 8 percent and operating margin compressed to 31 percent from 43 percent, signaling margin pressure from uncontrolled spending.

AI Bets Under Scrutiny

Zuckerberg has committed to spending roughly $145 billion this year on artificial intelligence and data centers, betting that AI capabilities will drive future revenue. But the market is not yet convinced these outlays will pay off. Meta outlook for next quarter disappointed investors, adding to pressure across the tech sector around AI spending priorities.

Meta beat on revenue but missed earnings, and free cash flow collapsed, leaving investors questioning whether the company spending discipline exists.