The company said it expects total spending by 2026 to be between $165bn and $169bn.
Tech giant Meta’s revenue and operating margin for the second quarter of 2026 were lower compared to the same period a year ago amid a large outflow for the period.
While revenue was up 28pc to $60.8bn in the period ending June 30, the company saw a huge jump in costs and expenses from around $27bn in Q2 2025 to more than $42bn this year.
Gross profit fell from $20.4bn to $18.8bn, operating margin fell from 43pc to 31pc. Net income fell year-on-year from $18.3bn to $15.8bn.
The 55pc year-on-year cost jump includes $2.4bn in costs for various legal proceedings and $1.8bn in severance costs taken from the company’s recent layoffs. It said it expects total spending by 2026 to be between $165bn and $169bn.
Meta’s free cash flow for the latest quarter was $784m, compared with more than $8bn last year, following an announced spend of more than $31bn on leases, property and equipment.
It said it expects capital spending by 2026 to be between $130bn and $145bn.
“As the use of AI in our products and businesses continues to grow, we continue to invest heavily in infrastructure to meet demand,” said Meta CEO Mark Zuckerberg on the company’s quarterly earnings call yesterday (July 29).
“Overall, we expect that a large part of our computer will go to training our models, growing our core business, and delivering personal agents and new products. But we also expect to grow a large business that serves large customers.”
Meta shares fell last night following the announcement of projected Q3 revenue of $62.5bn – lower than analysts’ expectations of more than $63bn, according to media reports.
Commenting on the financial results, analyst Mike Proulx of Forrester said “Meta believes that AI infrastructure is now a strategic asset, but its bill comes sooner than the reward”, noting that “cash generation this quarter was almost entirely consumed by the use of AI infrastructure”.
He added: “The money spent by Meta’s AI was easy to celebrate when the margins were expanded. It is difficult to celebrate as the costs are now visible in numbers.
“There is a slight and negative analogy of the metaverse in that Meta is reinvesting money before the need for a proven product.
“Investors must now decide whether Meta’s growing list of AI programs represents the company’s diversification or disruption. What makes that question even more difficult is that Meta’s legal and regulatory challenges are expensive, too.”
The number reported by the company as of June 30 was put at 75,472, which still includes about 8,000 workers affected by the recent layoffs.
CFO Susan Li told the earnings call that the company “will continue to monitor applicable legal and regulatory issues that could have a significant impact on our business and financial results”.
He added: “For example, we continue to see the scrutiny of youth-related issues in several markets and we have several youth-related trials scheduled for this year in the US, which may ultimately result in material losses.”
Proulx noted: “Meta’s biggest regulatory battles have often focused on privacy and competition. Now pressure is mounting on youth wellness, addiction and platform safety.
“That’s a different kind of risk because it has implications for future audience growth that powers Meta’s ad business which underwrites the company’s expensive AI costs.”
Don’t miss out on the information you need to succeed. Sign up for Daily BriefSilicon Republic’s digest of must-know sci-tech news.
