Meta's Q2 Profit Dips Amid Legal and Severance Costs, Revenue Surges
The social media giant reported a 14% drop in profit despite a 28% revenue increase, driven by significant legal expenses and employee severance packages.
Meta Platforms, the parent company of Facebook and Instagram, reported a 14% decline in second-quarter profit, amounting to $15.85 billion or $6.18 per share, compared to $18.34 billion or $7.14 per share in the same period last year. This profit decrease occurred even as revenue surpassed Wall Street expectations, growing 28% to $60.8 billion from $47.52 billion.
Analysts had anticipated earnings of $7.19 per share on revenue of $60.22 billion. The company attributed the lower profit to increased legal expenses and severance costs associated with recent layoffs.
CEO Mark Zuckerberg expressed optimism about the role of artificial intelligence in the company's future. "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," Zuckerberg stated. He highlighted the significant progress in AI, suggesting it could soon provide "personal superintelligence to everyone."
Meta's family of apps, which includes Facebook, Messenger, Instagram, WhatsApp, and Threads, saw a 3% increase in daily active users, reaching 3.6 billion. Instagram alone achieved the milestone of 2 billion daily users during the quarter, while Threads garnered 500 million monthly active users.
As of June 30, Meta employed 75,472 individuals, a 1% decrease year-over-year, a figure that still accounts for approximately 8,000 workers laid off in May. The company plans to provide updated employee numbers in its third-quarter report.
Despite Zuckerberg's positive outlook on AI, analysts note a potential challenge in balancing this optimistic messaging with growing public concern over the impact of social media on young users. "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," said Emarketer analyst Minda Smiley. "This juxtaposition could make it more difficult for Meta to build credibility in an area where it’s already a laggard."
Looking ahead, Meta projects third-quarter revenue to be between $61 billion and $64 billion, a range that falls slightly below the $63.14 billion expected by analysts. The company also revised its expense forecast upward, incorporating $2.4 billion in legal expenses, and now anticipates total expenses for 2026 to range from $165 billion to $169 billion.
Total expenses for the second quarter rose 55% year-over-year to $42.03 billion. This included $2.40 billion for legal proceedings and $1.18 billion for severance costs. The company's free cash flow experienced a significant drop of 91%, falling to $784 million from $8.55 billion a year prior.
Following the release of its earnings report, Meta's shares fell by 4.2% in after-hours trading, closing at $560.85.