Meta sinks 8% after Q3 revenue forecast misses Wall Street estimates

Investing.com -- Meta Platforms shares tumbled over 8% in pre-market trading on Thursday after the company posted a second-quarter earnings miss and forecast third-quarter revenue below Wall Street expectations.

Meta Platforms reported a 14% decline in second-quarter profit on Wednesday, sending its shares down 8% in after-hours trading as higher legal and restructuring costs outweighed strong advertising-led revenue growth.

BofA analysts said the sharp move down reflects investor "concerns on Meta’s investment direction." Total costs and expenses jumped 55% to $42.03 billion, including $2.4 billion of legal charges and $1.18 billion in severance costs related to its May workforce reduction.

"The expense raise, which includes ramping SBC, was disappointing given recent layoffs, but reflected significant costs that won’t recurring in 2027," analysts said.

The company reported second-quarter earnings per share of $6.18, missing analysts’ estimates of $7.17, while revenue rose to $60.8 billion, topping consensus expectations of $60.19 billion.

For the third quarter, the company forecast revenue of $61 billion to $64 billion, compared with analysts’ expectations of $63.24 billion, while raising the lower end of its full-year expense outlook to reflect legal charges incurred during the second quarter.

Meta’s results highlighted the trade-off between rapid AI investment and near-term earnings, with strong advertising growth offset by sharply higher expenses tied to legal matters, restructuring and infrastructure spending. Despite the profit decline, the company forecast another quarter of solid revenue growth.

Revenue rose 28% year-over-year to $60.8 billion, supported by a 14% increase in ad impressions and a 12% rise in the average price per advertisement. Family daily active people climbed 3% to 3.60 billion in June.

Chief Executive Mark Zuckerberg said artificial intelligence is accelerating the company’s core business, powering new products and opening up enterprise opportunities, adding that the benefits are already becoming evident.

"Although Meta did not follow Google into negative free cash flow, a print below $1 billion is jarring and reflects the cash burn investors have seen quarter after quarter. Another explosive quarter of capital spending could have ripple effects across the broader AI supply chain, particularly semiconductor companies that have recently fallen into a bear market. Meta may be paying the price, but its continued infrastructure buildout could provide a bullish catalyst elsewhere," said Ryan Lee, SVP of Product and Strategy at Direxion.

Meta spent $31.08 billion on capital expenditures during the quarter as it continued to expand AI infrastructure, while free cash flow fell sharply to $784 million from $8.55 billion a year earlier.

The company also narrowed its 2026 capital expenditure outlook to $130 billion-$145 billion, from a prior range of $125 billion-$145 billion, while raising the lower end of its full-year expense forecast to $165 billion-$169 billion to reflect second-quarter legal charges.

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