Meta Shares Slump 7% After Q2 Profit Falls 14% and Capex Guidance Raised

TradingKey - On July 29, Eastern Time, Meta Platforms ( META) fell over 7% to $541.44 in after-hours trading after releasing its second-quarter 2026 financial results.

During the period, Meta's revenue was $60.801 billion, up 28% year-over-year, slightly beating market expectations of $60.17 billion. Within this, the advertising business experienced growth in both volume and price, with ad impressions across the Family of Apps increasing 14% year-over-year and the average price per ad rising 12% year-over-year.

[Meta Stock Price Chart, Source: TradingView]

Looking at segment performance, the Family of Apps generated revenue of $60.37 billion, of which advertising revenue accounted for $59.363 billion; segment operating income was $23.394 billion, down from $24.971 billion in the same period last year. Reality Labs recorded revenue of $431 million, with its operating loss widening to $4.619 billion from $4.53 billion in the prior-year period.

[Source: Meta Q2 2026 Financial Report]

In terms of user metrics, the Family of Apps daily active people (DAP) averaged 3.6 billion in June, up 3% year-over-year, slightly below the market expectation of 3.61 billion.

On the profit side, under GAAP, Meta's second-quarter net income was $15.848 billion, down 14% year-over-year; diluted earnings per share was $6.18, down 13% year-over-year, far below the market expectation of $7.22. It is worth noting that the decline in profit was primarily dragged down by one-time charges—during the period, $2.4 billion in legal-related expenses and $1.18 billion in severance costs related to the May layoffs were recognized, totaling approximately $3.58 billion.

[Source: Meta Q2 2026 Financial Report]

In addition, the effective tax rate rose from 11% in the same period last year to 16%, which also exacerbated the year-over-year decline in net income. Total costs and expenses during the period increased by 55% year-over-year to $42.026 billion, operating income decreased by 8% year-over-year to $18.775 billion, and the operating margin narrowed from 43% to 31%.

Regarding capital expenditures, cash flow from operating activities was $31.86 billion in the second quarter, but capital expenditures reached as high as $31.08 billion, leaving free cash flow at just $784 million.

In terms of guidance, Meta expects third-quarter total revenue to be in the range of $61 billion to $64 billion; the full-year capital expenditures guidance was narrowed from the previous range of $125 billion to $145 billion to a range of $130 billion to $145 billion. The company maintained its expectation that operating income this year will be higher than in 2025, but raised its tax rate expectation for the remaining quarters of 2026 from 13%-16% to 15%-17%.