Meta Stock Drops 9% After Q2 Earnings Miss: Legal Charges and AI Spending Spook Wall Street

Meta stock sank roughly 9% in early trading on Thursday, July 30, 2026, after the social media giant reported second-quarter earnings that missed Wall Street’s profit expectations despite revenue growing 28% to $60.8 billion. A $2.4 billion charge for legal contingencies and a $1.2 billion severance charge dragged earnings per share down to $6.18 — far below the $7.14 analysts expected — while a lighter-than-hoped third-quarter forecast and a massive AI spending plan gave investors little reason to look past the miss.

Meta stock falls after Q2 2026 earnings miss on profit expectations — Meta stock fell sharply after Q2 2026 profit came in well below Wall Street estimates.

Key Takeaways for Meta Stock

Meta reported Q2 2026 EPS of $6.18 versus $7.14 expected — a rare miss — even though revenue of $60.8 billion beat the roughly $60.2 billion consensus.
Net income fell 14% to $15.85 billion, weighed down by $2.4 billion in legal contingencies and $1.2 billion in severance costs; without those items, Meta would have beaten estimates.
Third-quarter revenue guidance of $61 billion to $64 billion came in light against a Wall Street midpoint near $63.1 billion.
Meta narrowed its 2026 capital spending forecast to $130 billion to $145 billion — roughly double last year’s $72.2 billion — as the AI buildout accelerates.
Meta stock traded down around 9% Thursday morning, into the high $510s to low $520s, one day after Microsoft’s blowout report sent its own shares surging.

Meta’s Q2 2026 Earnings: Revenue Beat, Profit Miss

Meta Platforms released its second-quarter results after the closing bell on Wednesday, July 29, and the report split cleanly down the middle. The top line was strong: total revenue reached $60.8 billion, up 28% year over year and ahead of the roughly $60.2 billion analysts anticipated, powered by advertising revenue of $59.3 billion across Facebook, Instagram and WhatsApp, according to Yahoo Finance.

The bottom line told a different story. Net income declined 14% from a year earlier to $15.85 billion, translating to diluted earnings per share of $6.18 — well short of the $7.14 consensus from Bloomberg-surveyed analysts (LSEG had the bar even higher, near $7.22). For a company that has made beating estimates look routine, the shortfall landed hard, and Meta stock slumped immediately in after-hours trading before extending losses Thursday morning.

The $3.6 Billion in Charges Behind the Meta Stock Drop

Dig into the numbers and the miss becomes less about the core business and more about two one-time items. Meta booked $2.4 billion for legal contingencies and another $1.2 billion in severance expenses during the quarter. Strip those out, the company said, and it would have exceeded profit expectations — operating income would have grown about 9% year over year instead of falling 8% as reported.

The legal side is what has analysts most cautious about Meta stock going forward. Chief financial officer Susan Li told investors that active legal and regulatory matters could significantly affect results, pointing specifically to continued scrutiny of youth-related issues in multiple markets and several youth-related trials scheduled in the United States this year that could ultimately produce a material loss, per Variety. In other words, the $2.4 billion charge may not be the last of its kind — and that uncertainty is difficult for Wall Street to price.

AI Spending: Capex Narrowed to $130–$145 Billion

Then there is the spending. Meta narrowed its 2026 capital expenditure forecast to a range of $130 billion to $145 billion, up from a prior floor of $125 billion — an almost unfathomable figure next to the $72.2 billion it spent in all of 2025. The money is overwhelmingly going into data centers, chips and the infrastructure behind Meta’s AI ambitions, mirroring similar capex escalations at Alphabet, Amazon and Microsoft.

The costs are showing up everywhere in the income statement. Total costs and expenses jumped 55% year over year to $42 billion. Research and development spending soared 67% to $21.7 billion. Reality Labs, the company’s hardware and metaverse division, lost more than $4.6 billion in the quarter. And free cash flow — the metric long-term investors watch most closely — shrank to just $784 million as infrastructure spending consumed nearly all of the $31.9 billion in operating cash flow Meta generated. The company has also turned to creative financing to ease the strain, including a $14 billion El Paso data center project in which BlackRock-managed funds hold an 80% stake.

Meta AI capital spending forecast of 130 to 145 billion dollars weighs on Meta stock — Meta’s 2026 AI infrastructure budget of $130–$145 billion is roughly double its 2025 spending.

Light Q3 Guidance Adds to the Pressure

Guidance compounded the problem. Meta projected third-quarter revenue between $61 billion and $64 billion, a range whose $62.5 billion midpoint sits below the $63.1 billion Wall Street had penciled in. It is a modest shortfall in percentage terms, but after an EPS miss and a capex number with twelve zeros, a soft forecast was the last thing nervous shareholders wanted. The stock traded down as much as 11% at points during Thursday’s session, changing hands in the high $510s, before paring some of the decline.

Meta Stock vs. Microsoft: A Tale of Two AI Bets

The timing made the sell-off sting more. Less than 24 hours earlier, Microsoft posted a quarter that showed AI investment translating directly into revenue — Azure topped $100 billion for the year and MSFT stock surged about 8% on the results. Both companies are spending historic sums on AI infrastructure; the difference, for now, is that Microsoft can point to a cloud business monetizing that capacity immediately, while Meta is asking investors to trust that better ad targeting, new AI products and its superintelligence research will justify the bill later.

To be fair, Meta’s core machine keeps humming: 28% ad revenue growth at this scale is remarkable, and management noted that AI is already lifting ad pricing and engagement across its apps. The debate over Meta stock is not about whether the business works — it is about how much near-term profit investors will sacrifice for a long-term AI vision, and how large the legal overhang eventually proves to be.

Bulls vs. Bears: The Two Sides of the Meta Stock Debate

The sell-off has predictably split analysts into two camps. The bullish case: the core advertising engine is accelerating, not slowing — 28% growth on a $60 billion quarterly base is elite — and the earnings miss was manufactured almost entirely by one-time charges rather than operational weakness. Some valuation models now flag the stock as attractively priced after the drop; data from GuruFocus, for example, pegged Meta’s trailing price-to-earnings ratio near 21, meaningfully below its own five-year median around 26, suggesting the market is already discounting a lot of bad news.

The bearish case is equally straightforward: legal risk is unquantifiable, capital spending is doubling with returns still largely theoretical, and free cash flow of $784 million for a company of this size leaves no margin for error if advertising ever decelerates. Bears also point out that Reality Labs continues to burn more than $4 billion per quarter with no clear payoff timeline. Which camp proves right will likely depend on the two numbers this article keeps returning to — the capex range and the legal accruals — over the next several quarters. As always, investors should weigh both sides against their own research and risk tolerance rather than any single quarter’s headlines.

What Analysts Are Watching Next

Three storylines will drive Meta stock through the rest of 2026: whether advertising growth can stay above 20% as comparisons get tougher, whether the capex range holds at $130–$145 billion or creeps higher again, and how the U.S. youth-safety trials unfold. Any additional legal accruals on the scale of this quarter’s $2.4 billion charge would pressure earnings again; conversely, clean quarters without one-time items would let the underlying growth show through. Meta’s next earnings report, covering the third quarter, is expected in late October.

Frequently Asked Questions

Why did Meta stock drop today?

Meta stock fell about 9% on July 30, 2026, because second-quarter EPS of $6.18 missed the $7.14 estimate, hurt by $2.4 billion in legal charges and $1.2 billion in severance costs, while Q3 revenue guidance also came in below Wall Street’s midpoint.

Did Meta beat or miss Q2 2026 earnings?

Both. Meta beat on revenue with $60.8 billion, up 28% year over year, but missed on profit, with EPS of $6.18 versus roughly $7.14 expected. Excluding one-time charges, the company says it would have topped estimates.

How much is Meta spending on AI in 2026?

Meta expects 2026 capital expenditures of $130 billion to $145 billion, mostly for AI data centers and infrastructure — roughly double the $72.2 billion it spent in 2025.

What is Meta’s Q3 2026 revenue guidance?

Meta guided third-quarter revenue to between $61 billion and $64 billion. Analysts were expecting a midpoint of about $63.1 billion, so the forecast was viewed as slightly light.