Meta EPS dips, as revenue surges 28% year on year

Meta Platforms reported mixed second-quarter financial results, with revenue topping Wall Street estimates while profits fell sharply due to heavy investments in artificial intelligence infrastructure and ongoing legal costs.

Adjusted earnings per share (EPS) fell 31.5% year-on-year to $6.18, missing the $8.58 consensus estimate compiled by Bloomberg.

However, quarterly revenue grew 28% year-on-year to $60.8 billion, beating projections of $60.2 billion on sustained ad demand across Facebook, Instagram, and WhatsApp.

Ad impressions across Meta’s Family of Apps grew 14% year-on-year, supported by a 3% rise in daily active users and a 12% increase in average ad prices. Family of Apps revenue increased 28%, while Reality Labs revenue rose 16.5%.

Despite top-line growth, operating income fell 8.2% to $18.8 billion, below expectations of $21.5 billion. Total costs spiked 55% year-on-year to $42 billion, driving operating margins down to ~31% from ~43% a year earlier.

Rising expenses were exacerbated by a $2.4 billion charge related to ongoing youth-safety litigation and regulatory proceedings, alongside $1.18 billion in severance charges from workforce restructuring.

While operating cash flow remained healthy at $31.9 billion, free cash flow plunged 90.8% year-on-year to $784 million as capital expenditure surged toward generative AI capacity.

As a result, Meta paused share repurchases during the quarter, allocating capital to dividend payments ($1.35 billion), debt service, and data center expansion.

For the third quarter, management expects revenue between $61 billion and $64 billion, compared to market expectations of $63.19 billion.

The company also raised its full-year expense guidance to $165 billion–$169 billion and capital expenditure guidance to $130 billion–$145 billion.