Meta Stock Just Got Hammered, But the Bull Case Is Getting Harder to Ignore

Meta Platforms (META) stock got hammered after the social media giant missed Wall Street’s earnings expectations for the second quarter. The problem wasn’t revenue, as Meta delivered record sales of $60.8 billion, up 28% year-over-year (YOY) and slightly ahead of estimates. The problem was profitability.

Earnings per share fell 13% YOY to $6.18, while total costs and expenses jumped 55% to $42 billion. Two major charges — $2.4 billion tied to legal proceedings and $1.18 billion in severance costs — played a major role in the earnings miss.

Investors clearly did not like what they saw. META stock plunged nearly 8% after the report, extending a painful losing streak.

Meta Faces Growing Pressure in 2026

META stock has already had a difficult year, with the latest earnings reaction making things worse. Shares ended the day near $539 on July 30 after falling sharply. Meta Platforms stock is now down more than 15% year-to-date (YTD) as investors question whether the company's aggressive artificial intelligence (AI) spending will generate enough returns to justify the enormous upfront costs.

That concern is becoming harder to ignore. Meta is now guiding for $130 billion to $145 billion in 2026 capital expenditures. The company previously expected capex of $125 billion to $145 billion. 

That means investors are being asked to accept enormous spending today for potentially larger AI opportunities tomorrow. The market is clearly becoming less patient in that regard.

Meta’s Earnings Miss Wasn’t About Weak Demand

The good news is that Meta's core business remains remarkably strong. Revenue increased 28% to $60.8 billion in Q2, with advertising revenue jumping 27% to $59.36 billion. Ad impressions increased 14% during the quarter while average price per ad climbed 12%. Meta also averaged 3.6 billion daily active people across its Family of Apps, up 3% YOY.

So, why did earnings fall? Expenses.

Meta's $42.03 billion in quarterly costs and expenses included $2.4 billion in legal charges and $1.18 billion related to the workforce reduction in May 2026. Operating margin consequently dropped to 31% from 43% a year earlier. Net income fell 14% YOY to $15.85 billion, while EPS declined 13% YOY to $6.18 from $7.14.

Free cash flow was arguably the biggest shock. The figure plunged 91% YOY to just $784 million as capital expenditures reached $31.08 billion in Q2. The problem is that investors are increasingly asking how much of that will eventually translate into free cash flow.

For now, the balance sheet provides some comfort. The company ended June with $90.26 billion in cash, cash equivalents, and marketable securities.

Meta is still growing rapidly, but the cost of that growth is becoming enormous.

Meta Platforms Is Spending Big Beyond Advertising

Meta isn't simply throwing money at AI without a strategy.

The company is investing heavily in data centers, AI infrastructure, and new products. For example, Meta recently announced a partnership with BlackRock (BLK) to develop a roughly $14 billion data-center campus in El Paso, Texas.

CEO Mark Zuckerberg is also exploring opportunities to monetize Meta's enormous AI infrastructure beyond its own applications. Meanwhile, Meta continues developing AI models, Meta AI, business messaging, and other products that could eventually create new revenue streams.

Reality Labs remains another major investment. The division generated $431 million of revenue in Q2 but continued to post heavy operating losses.

Wall Street Still Sees Upside in META Stock

Wall Street remains broadly bullish on META stock, although analysts are becoming more cautious about Meta's spending.

Goldman Sachs recently maintained a “Buy” rating while cutting its price target to $725 from $815. Evercore ISI also kept a “Buy” rating but lowered its target to $820 from $930. Both JPMorgan and Wells Fargo reduced their targets to $640, while Baird lowered its target to $750 but maintained an “Outperform” rating.

Overall, Meta Platforms stock has a consensus “ Strong Buy” rating based on 54 analysts with coverage. The mean price target of $768.20 implies potential upside of 38% from current levels.

Looking ahead, Meta still has an awesome, underpinning business of ads going for it. But there has to be proof for investors that the company's massive spending on AI will eventually yield nice returns. It's less an issue of the business being broken and more an issue of the investors' mindsets changing.