Meta Platforms delivered another blockbuster quarter for revenue, but investors were reminded that the race to dominate artificial intelligence comes at a steep cost.
The social media giant reported second-quarter revenue of $60.8 billion, beating Wall Street expectations, while earnings per share missed forecasts as massive AI infrastructure investments, legal charges, and restructuring costs weighed on profitability.
Meta’s AI Strategy Drives Revenue Growth
Meta reported 28% year-over-year revenue growth to $60.8 billion, exceeding analyst estimates of roughly $60.2 billion. Advertising remained the company’s primary growth engine, supported by AI-powered recommendation algorithms that improved engagement and ad targeting.
The company said ad impressions increased 14% from a year earlier, while the average price per advertisement rose 12%, helping push Family daily active people (DAP) to 3.60 billion, up 3% year over year.
CEO Mark Zuckerberg said AI is already accelerating Meta’s core business while creating new enterprise opportunities, highlighting the company’s long-term strategy of embedding AI across its platforms.
Profit Margins Feel the Weight of AI Investments
Despite stronger sales, profitability moved in the opposite direction.
Diluted earnings per share declined to $6.18, down from $7.14 a year ago, while operating margin narrowed sharply to 31% from 43%.
Meta’s total costs and expenses surged 55% to $42.03 billion, reflecting $2.4 billion in legal-related charges, $1.18 billion in severance expenses, and continued spending on AI research and data center expansion.
The company generated $31.86 billion in operating cash flow during the quarter but reported just $784 million in free cash flow after spending more than $31 billion on capital expenditures, illustrating the enormous cost of scaling AI infrastructure.
Meta Doubles Down on AI Spending
Looking ahead, Meta raised the lower end of its 2026 capital expenditure guidance to $130 billion-$145 billion, up from its previous outlook of $125 billion-$145 billion.
The company also increased the lower end of its full-year expense guidance to $165 billion-$169 billion, while projecting third-quarter revenue between $61 billion and $64 billion. Management maintained that full-year operating income should still exceed 2025 levels despite the higher spending outlook.
What’s Next?
Meta’s earnings reinforce a defining theme for investors in 2026: AI is driving stronger revenue across the technology sector, but the infrastructure race is becoming increasingly expensive. Investors will now watch whether Meta’s record AI spending translates into sustained advertising growth, expanding enterprise AI opportunities, and improved profitability in future quarters. The company’s next earnings report and updates on AI monetization will be closely monitored as the competition among Big Tech leaders intensifies.