Meta's Q2 revenue rose 28% year-over-year to $60.8 billion, with its advertising business remaining resilient, but earnings per share were only $6.18, significantly below market expectations of $7.22. Total costs surged 55% year-over-year to $42.03 billion, including $2.4 billion in litigation costs and $1.18 billion in layoff expenses, while net profit declined 14% year-over-year.
The real trigger for the sell-off was the imbalance between cash flow and investment. Operating cash flow for the quarter was $31.86 billion, but capital expenditures reached $31.08 billion, causing free cash flow to plummet 91% year-over-year to $784 million. The company further narrowed its full-year capital expenditure guidance to $130 billion-$145 billion, and the midpoint of its next quarter's revenue guidance was also slightly below market expectations.
The market is shifting from rewarding "the scale of AI investment" to asking "when will AI generate returns?" Meta's core advertising business is still growing, but with rising capital expenditures, depreciation, and financing burdens, investors need to see AI not only improve recommendation and advertising efficiency but also generate new high-profit revenue. Otherwise, continued pressure on free cash flow will directly compress valuation tolerance.
