Meta shares drop as Q2 profit declines due to legal expenses and severance costs
Meta Platforms said Wednesday its second-quarter profit declined even as revenue beat Wall Street's expectations, as legal expenses and severance costs for recent layoffs weighed on its results.
The Facebook and Instagram parent company earned $15.85 billion, or $6.18 per share, in the April-June period. That's down 14% from $18.34 billion, or $7.14 per share, in the same period a year earlier.
Revenue grew 28% to $60.8 billion from $47.52 billion.
Analysts, on average, were expecting earnings of $7.19 per share on revenue of $60.22 billion, according to a poll by FactSet.
“AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities,” said CEO Mark Zuckerberg in a statement. “The results are already showing, and I’m optimistic about the potential ahead.”
Meta said the number of daily active users on its “family of apps” — Facebook, Messenger, Instagram and WhatsApp and Threads — grew 3% from a year earlier to $3.6 billion. Zuckerberg said Instagram reached the 2 billion daily users milestone during the quarter, while Threads has 500 million monthly active users.
The Menlo Park, California-based company had 75,472 employees as of June 30, a decrease of 1% year-over-year. This still includes the roughly 8,000 workers the company said it would lay off. Meta said its third-quarter earnings report will have the updated figure.
“Earnings come just as Meta pushes out an ad campaign and media blitz that aim to clarify Meta’s stance and goals regarding AI. It’s not surprising that Zuckerberg wants to come out with a more cohesive message around the company’s AI ambitions, especially as Meta tries to carve out its own lane,” said Emarketer analyst Minda Smiley. Zuckerberg wrote a glowing op-ed about AI's future in the Wall Street Journal on Tuesday, arguing that AI may soon deliver "personal superintelligence to everyone.”
But Smiley said the "optimistic, positive tone he’s striking stands in stark contrast to the negative sentiment that’s building toward social media companies over claims that they’ve harmed and addicted kids. This juxtaposition could make it more difficult for Meta to build credibility in an area where it’s already a laggard.”
For the current quarter, Meta is forecasting revenue in the range of $61 billion to $64 billion, the midpoint of which is lower than the $63.14 billion that analysts are expecting.
Meta also raised the lower end of its expense outlook to incorporate the $2.4 billion in legal expenses. It now expects total 2026 expenses to be in the range of $165 billion to $169 billion.
Expenses for the second quarter were $42.03 billion, an increase of 55% year-over-year. Meta said this includes $2.40 billion of charges related to legal proceedings and $1.18 billion of severance expenses in connection with the layoffs announced in May.
The company's free cash flow — money left over after paying operating costs and capital expenditures — dropped 91% to $784 million from $8.55 billion a year earlier.
Meta's shares fell $24.76, or 4.2%, to $560.85 in after-hours trading after the results came out.
© Copyright The Associated Press. All rights reserved. The information contained in this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.
