Key Highlights

  • Second-quarter revenue rose 28% year over year to $60.8 billion, led by family of apps advertising.
  • Total costs and expenses increased 55%, including $2.4 billion in legal charges and $1.2 billion in severance costs.
  • Capital expenditures, including finance lease payments, reached $31.1 billion for the quarter.
  • Full-year 2026 capital expenditure guidance was narrowed to a range of $130 billion to $145 billion.

Advertising Growth Accelerates as AI Reshapes Content Ranking

Meta Platforms, Inc. (NASDAQ:META) reported second-quarter revenue of $60.8 billion, an increase of 28% year over year, with advertising revenue within its family of apps segment rising 27% to $59.4 billion. Ad impressions across the company's services grew 14%, while the average price per ad increased 12%, reflecting both stronger engagement and improved ad targeting.

Daily active people across Meta's apps averaged 3.6 billion in June, up 3% from a year earlier. Management pointed to large language models now embedded in content recommendation systems as a key driver of engagement gains, with video time spent on Facebook increasing 9% globally and more than 10% within the U.S. and Canada.

Legal Charges and Severance Costs Weigh on Reported Profitability

Total costs and expenses climbed 55% to $42.0 billion, a figure that included $2.4 billion in charges tied to legal proceedings and $1.2 billion in severance expenses connected to a headcount reduction announced in May. Excluding these one-time items, operating income would have grown approximately 9% year over year rather than declining 8% as reported.

Headcount stood at roughly 75,500 by the end of the quarter, a 1% decline from a year earlier, with about 8,000 employees affected by the reduction expected to be fully removed from reported headcount by the end of the third quarter. Growth in employee compensation costs outside the severance charge was concentrated in technical hiring, particularly for artificial intelligence roles.

Free cash flow fell sharply to $784 million for the quarter, down from higher levels a year earlier, reflecting the scale of ongoing capital spending on data centers and network infrastructure. The company disclosed a new data center venture with BlackRock in Texas as part of its broader infrastructure buildout.

Enterprise AI Ambitions Could Diversify Revenue, But Payoff Timing Is Uncertain

Management guided to third-quarter revenue in a range of $61 billion to $64 billion, with foreign currency expected to be a modest headwind. Full-year expense guidance was raised to $165 billion to $169 billion to reflect the legal charge recognized in the quarter, while capital expenditure guidance was narrowed to $130 billion to $145 billion.

Executives described plans to expand monetization beyond advertising through business agents on messaging platforms, a new subscription tier, and an application programming interface for the company's latest models, though specific revenue contributions from these initiatives were not disclosed. More than one million businesses were reported to be using Meta's business agents on a weekly basis.

Ongoing legal and regulatory scrutiny presents a further source of uncertainty, with management flagging a number of youth-related trials scheduled in the United States this year that it said may result in a material loss. The scale of future infrastructure spending also remains unsettled, with the company not yet providing specific 2027 capital expenditure guidance.

Conclusion

Meta's second quarter showed advertising revenue continuing to benefit from AI-driven improvements to content ranking and ad targeting, even as reported profitability was masked by legal and restructuring charges. The path forward depends heavily on whether new revenue lines in business agents, subscriptions, and enterprise AI services can begin contributing meaningfully, a timeline that remains unclear given the early stage of these initiatives and the scale of continued infrastructure investment.