Meta Stock Slides Ahead of Q2 Earnings as AI Spending, Ad Growth Stay in Focus

TradingKey - Meta Platforms (NASDAQ: META) is set to deliver one of the most anticipated earnings statements of the year as investors decide if accelerating AI investment can outweigh concerns about slowing profit growth. Shares are down about 8% over the past five trading days, lagging behind the Nasdaq, with capital expenditure concerns mounting following Alphabet’s earnings.

On July 29, analysts expect Meta to report revenue of about $60.2 billion and EPS of between $7.18 and $7.23. However, any surprises regarding capital expenditure are likely to come not from the financials themselves, but from management commentary on its AI strategy, including the possible development of a cloud computing business, and updates on reported discussions with Anthropic.

Anthropic Partnership Could Reshape Meta’s AI Strategy

Another potentially huge development for Meta is also getting minimal coverage. According to The New York Times, Meta is negotiating to provide computing power to Anthropic in a potential $10 billion deal over two years. And separately, Bloomberg reported that Meta is working on a cloud computing business, with CEO Mark Zuckerberg saying commercial AI infrastructure is “definitely on the table.”

If the Anthropic deal is legitimate, it’s a big strategic shift for Meta. It currently derives nearly all of its revenue from ads, so selling computing capacity to third-party AI companies would mean building out a B2B business akin to AWS, Azure, and Google Cloud, rather than just deploying AI computing internally. 

This is important because Meta plans to spend between $125 billion and $145 billion on AI infrastructure in 2026. Selling computing resources to external buyers would allow Meta to recoup some of the money it’s spending on hardware, easing worries about the drag from excessive capital spending.

What Will Shareholders Want to Know on Wednesday

Wall Street expects Meta to report Q2 earnings per share of about $7.20 and revenue of about $60.2 billion, in line with the upper end of guidance. A strong set of results would be welcomed, but investors are more likely to focus on capex and Meta’s AI strategy than the earnings itself.

Key questions include whether Meta sustains its $125 billion to $145 billion guidance, talks further about the potential cloud computing business, and sheds light on the Anthropic partnership. Earnings guidance for the third quarter and advertising trends will also be watched closely to determine if AI investments are driving better user engagement and monetization. After Alphabet fell after its earnings report due to spending on AI, Meta’s commentary on capital spending could have an outsized effect on the stock.

Ad Business Remains Strong Despite AI Spending Concerns

Despite concerns that AI spending is eating into profitability, Meta’s ad business remains highly lucrative. In the first quarter, Meta’s ad revenue increased 33% year over year to $55.02 billion, supported by a 19% increase in ad volume and a 12% increase in ad prices. The number of daily users across Meta’s apps grew 4% year over year to 3.56 billion, underscoring continued growth across the platforms.

Advertising demand seems to have held up well into the second quarter. Deutsche Bank checks showed that brands are continuing to spend heavily, fueling expectations that Meta will beat revenue estimates for a second consecutive quarter. While Meta expects to report lower operating margins in the second quarter than the prior year as AI spending increases, the company still generated enough cash in the first quarter to continue to grow its balance sheet. 

Reality Labs remains the biggest drain on profitability. The division posted an operating loss of $4.03 billion in the first quarter on just $402 million in revenue, and expects another multibillion-dollar loss in the second quarter. 

Still, Meta brought in $12.39 billion in free cash flow in the first quarter while spending $19.84 billion in capital expenditure, and finished the quarter with more than $22 billion in cash. This allows management to continue to invest in its long-term AI initiatives and other key growth areas.

META Technical Analysis

Meta is trading at $595.31, which is below the 50-period EMA at $623 and the 200-period EMA at $613.86, thus putting short-term momentum on hold. The RSI is at 33.5, which indicates that the stock may soon enter oversold conditions, but buyers haven’t stepped in to trigger a reversal. Support is located at $582.39, $558.50, and $540.53, while $600 and the $613.86 to $623 EMA resistance band represent key upside levels.

Meta Price Chart - Source: Tradingview

Key Levels

• Q2 Earnings: July 29 after the market closes.
• Consensus: $60.2B revenue, $7.18 to $7.23 EPS.
• Options Market: 7.4% implied move post-earnings.
• Support: $582.39, $558.50, $540.53.
• Resistance: $600, $613.86, $623.86.

Why Is Meta Stock Falling Before Its Q2 Earnings?

Meta has declined as investors are concerned over the company’s AI spend, capex guidance, and whether its earnings will live up to its investments. The stock dropped 8% last week compared to the Nasdaq’s 2.1% drop, largely due to worries over Meta’s AI capex in the wake of Alphabet’s selloff after the earnings report citing $44.9 billion in quarterly capex.

Meta is forecasting $125 billion to $145 billion in capex for the full year of 2026 and the second quarter is likely to be twice the amount of the first quarter. That is the same kind of thing that was cited for Alphabet.

With 18x forward earnings, an 82% gross margin, and 57 Buy ratings from Wall Street, the fundamentals look strong. However, the capex guidance on July 29 will tell us whether the stock deserves its current discount.

What Will Investors Focus on in Meta's Earnings Report?

There are three key areas.

The first is capex, where anything above $40 billion in Q2 or any increase in full-year guidance will be examined in the light of Alphabet’s report.

The second is whether Mark Zuckerberg announces a cloud computing business; a fourth hyperscaler announcement would be the biggest market-moving news since the metaverse.

The third area is Q3 revenue, where the $63.2 billion consensus is what management guidance will need to beat or meet. Ad revenue, ad impressions, and average prices are the key metrics that will show whether AI spending is having a measurable effect on ad performance.

Bottom Line

Meta will report Q2 2026 earnings on July 29 at $595, and the RSI is nearing 33. The consensus is $60.22 billion in revenue and $7.18 to $7.23 EPS. The capex figure and any cloud business announcements are the only things that will move the stock more than the top-line revenue.

Options are pricing in a 7.4% move either way. There are 57 Buy ratings and an average target of $818 to $826, which represents 37% to 39% upside.

If the capex number is disappointing, $582 support and $558 below that are the downside targets. The EMA cluster at $613 to $625 is the upside target if we get a solid beat on Wednesday with manageable spending.