Meta Stock Price Forecast: Shares Fall Despite Revenue Beat; Can META Still Rise?

TradingKey - As of July 29 Eastern Time, Meta (META) released its fiscal second-quarter 2026 earnings. Although the company's revenue grew 28% year-over-year to $60.8 billion, beating market expectations, META's stock plummeted 7% in after-hours trading due to earnings missing estimates, a sharp decline in free cash flow, and a continuous increase in AI capital expenditures.

Why Meta Shares Are Falling

Judging from the earnings report, Meta's core advertising business continues to maintain robust growth. Data shows that in the second quarter, Meta generated revenue of $60.8 billion, a year-over-year increase of 28%, with advertising revenue up approximately 27% year-over-year. Daily active users for its Family of Apps reached 3.6 billion, hitting another record high, demonstrating that user engagement on Facebook, Instagram, WhatsApp, and Threads continues to rise, while AI recommendation algorithms also continue to drive ad monetization capabilities.

However, the company's earnings performance fell short of market expectations. Meta's second-quarter earnings per share (EPS) stood at $6.18, below the market expectation of $7.19, with net income declining by approximately 14% year-over-year. Meanwhile, the company's free cash flow was only $784 million, a year-over-year decrease of 91%, primarily due to a significant increase in AI data center construction, legal expenses, and severance costs.

At the same time, the company raised its 2026 capital expenditure guidance to a range of $130 billion to $145 billion, higher than previous expectations. CEO Mark Zuckerberg stated that Meta will continue to accelerate its AI infrastructure buildout over the next few years, aiming to construct an AI ecosystem that spans advertising, social media, AI assistants, and smart glasses, and noted that the company is still in the early stages of the AI investment cycle.

For investors, AI investment is clearly eroding short-term profitability. Following Alphabet's previous earnings release, the market had already begun to worry about the continuous rise in capital expenditures and the corresponding decline in free cash flow among large tech companies. Now, with Meta raising its AI capital expenditures once again alongside a sharp drop in free cash flow, the market may worry that the pace of AI commercialization is still insufficient to cover rapidly growing investment costs. Consequently, even though revenue beat expectations, the stock price still experienced a notable pullback.

Can Meta Shares Keep Rising?

At present, Meta's greatest advantage still comes from its advertising business. AI recommendation algorithms continue to improve ad delivery efficiency, maintaining rapid growth in ad revenue, while the monetization of Threads and WhatsApp, as well as AI advertising tools, still have significant room for growth. The advertising business remains Meta's most stable source of cash flow and an important foundation supporting its AI investments.

Meanwhile, Meta is trying to find new growth engines. Aside from generative AI assistants, the company is advancing multiple businesses, such as Meta Compute, AI compute services, smart glasses, and enterprise AI. MarketWatch cited RBC analyst Brad Erickson as saying that if Meta can provide clearer AI monetization metrics, customer adoption, and expansion paths for compute services, the market's investment thesis for Meta could undergo a significant shift.

However, over the coming quarters, the return on AI investment will remain a key factor determining Meta's stock price trend. If AI advertising, AI assistants, smart glasses, and enterprise AI services can continue to contribute revenue while free cash flow gradually recovers, the market may again grant Meta a higher valuation. Conversely, if capital expenditures continue to grow rapidly while margins and cash flows remain under pressure, META's stock price may continue to fluctuate in the short term.

Meta Stock Price Technical Analysis

META stock price weekly chart, Source: TradingView

Based on the weekly chart of META's stock price, the recent candlestick highs show a continuous downward trend, forming a clear descending trendline. This implies that bearish market sentiment is dominating, and the stock price may continue to correct downward in the short term.

On the downside, the immediate support below the stock price is at $540. If this level is breached, the stock price may test the $520 support level. A further decline could push the stock price down to the $480 support level.

On the upside, the stock price faces a gap of $608-$627 above. The primary goal of a rebound would be to fill this gap. Further up, the stock price may test the resistance level near $680-$700. A breakthrough above $700 would open up upside potential toward $800.