Meta shares drop 10% after Q2 earnings miss on AI costs

Shares of Meta Platforms fell sharply on Wednesday, July 29, after the company reported second-quarter earnings that revealed a stark divergence between its robust advertising revenue and soaring costs driven by aggressive artificial intelligence investments. The stock dropped more than 10% in after-hours trading following the release.

The company reported revenue of $60.8 billion for the quarter, a 28% year-over-year increase that exceeded analyst expectations. The core advertising business showed strength, with ad impressions rising 14% and the average price per ad increasing 12%. However, earnings per share of $6.18 missed consensus estimates by a significant margin.

The primary driver of the profit shortfall was a 55% surge in total costs and expenses, which reached $42.0 billion. This figure included $2.4 billion in litigation charges and elevated severance costs, but the structural increase stems from the company's accelerating spending on AI infrastructure. Meta raised its full-year 2026 capital expenditure guidance to a range of $130 billion to $145 billion, a sharp increase from prior guidance. The company now projects total expenses for the year to be between $165...