A summary of Meta’s Q2 2026 earnings report — the quarter ended June 30, 2026, reported July 29, 2026.
Source: Meta’s Q2 2026 press release, earnings call transcript, and investor presentation deck.
Highlights
- Revenue: $60.8B, up 28% year-over-year — Meta says this is the fastest ad-revenue growth of any reported ad business.
- Ad impressions up 14%, average price per ad up 12%.
- Average revenue per person: $16.86, up from $13.65 a year ago.
- Instagram passed 2 billion daily actives; WhatsApp hit a record 30 million messages sent per second during the World Cup Final.
Lowlights
- Operating margin fell to 31%, from 43% a year ago — a two-year low.
- Free cash flow collapsed 91% to $784 million.
- Share buybacks paused entirely: $0, versus $22.9 billion in the first half of 2025.
- $3.58 billion in one-time legal and severance charges; R&D alone added $8.7 billion in costs on top of that.
The headline numbers
Vs. Wall Street (FactSet consensus):
| Metric | Result |
|---|---|
| Revenue | Beat — $60.80B vs. $60.22B estimate (+1.0%) |
| EPS | Miss — $6.18 vs. $7.13 estimate (−13.3%) |
| Forward guidance | Miss — Q3 guidance midpoint $62.5B (range $61–64B) vs. ~$63.1B analyst consensus, about 1% light |
| Metric | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Revenue | $60.80B | $47.52B | +28% |
| Cost of revenue | ($11.33B) | ($8.49B) | +33% |
| Gross profit | $49.47B | $39.03B | +27% |
| Gross margin | 81.4% | 82.1% | −0.7 pts |
| Operating expenses (R&D + sales & marketing + G&A) | ($30.70B) | ($18.58B) | +65% |
| Operating income | $18.78B | $20.44B | −8% |
| Operating margin | 31% | 43% | −12 pts |
| Other income (expense), net | ($0.02B) | $0.09B | — |
| Income before taxes | $18.76B | $20.53B | −9% |
| Tax provision (effective rate) | ($2.91B · 16%) | ($2.20B · 11%) | rate +5 pts |
| Net income | $15.85B | $18.34B | −14% |
| Diluted EPS | $6.18 | $7.14 | −13% |
| Capital expenditures | $31.08B | $17.01B | +83% |
| Free cash flow | $0.78B | $8.55B | −91% |
Revenue grew nearly 30%. Profit shrank. Gross margin barely moved — the damage isn’t in what it costs Meta to run its services, it’s in everything below that line. That’s where the whole story of this quarter lives.
Two more things happen between operating income and net income: a small non-operating expense, and taxes. The tax bite grew from 11% of pre-tax income to 16% — on its own a modest-sounding jump, but it means net income fell by more than operating income did, not less.
The tension
Meta’s advertising business just had one of its best quarters ever. Its AI buildout just had one of its most expensive. Both happened in the same 90 days — and the AI spending is now large enough to visibly bend the ad business’s profits downward, even though the ad business itself didn’t slow down at all.
Where the growth is coming from
Meta’s revenue is still almost entirely advertising — $59.4 billion of the $60.8 billion total — and that engine is running hot:
- Ad impressions (how many ads got shown) grew 14% year-over-year.
- Average price per ad grew 12% year-over-year — meaning each ad is worth more, not just that more ads are being shown.
- Family daily active people (DAP) — everyone using Facebook, Instagram, Messenger, or WhatsApp at least once a day — reached 3.60 billion, up 3%.
- Average revenue per person climbed to $16.86, up from $13.65 a year ago — Meta is making meaningfully more money per user, not just adding users.
Management’s framing, direct from the call: on a dollar basis, Meta says its ad business is growing faster year-over-year than any other company’s reported ad business. That’s a bold claim, but the underlying numbers — impressions up, price up, revenue per person up, all at once — back it up rather than contradict it.
Where the money's going
Total costs and expenses rose 55% — nearly double the pace of revenue. Here’s every line, biggest mover first:
| Expense line | Q2 2026 | Q2 2025 | Change |
|---|---|---|---|
| Research & development | $21.66B | $12.94B | +67% |
| General & administrative | $5.61B | $2.66B | +111% |
| Cost of revenue | $11.33B | $8.49B | +33% |
| Marketing & sales | $3.43B | $2.98B | +15% |
| Total costs and expenses | $42.03B | $27.08B | +55% |
Two lines are doing almost all the damage. R&D added $8.7 billion in a single year — by far the largest dollar increase of any line, and bigger in dollar terms than the other three lines’ increases combined. G&A more than doubled, largely because it absorbed the $2.4 billion legal-proceedings charge. Layered on top of both: $1.18 billion in severance tied to the May 2026 headcount reduction. Some of that is one-time noise; most of it isn’t.
The one-time part: $2.4 billion in legal charges and $1.18 billion in severance from a May 2026 headcount reduction — $3.58 billion combined, in a single quarter. Strip those out and operating income would have grown 9% year-over-year instead of falling 8%.
The part that isn’t one-time: Research & development spending alone jumped from 31% of revenue last quarter to 36% this quarter — the sharpest jump in over two years of quarterly data. Management attributes this to “employee compensation, infrastructure costs, legal-related costs, and third-party AI token costs” — in plain terms: more AI researchers, more data centers, more depreciation on servers, and literally paying other companies for AI compute. Operating margin has now fallen for two straight quarters and sits at its lowest point in the last two years, even after excluding the legal/severance charges.
The cash story
This is where the quarter looks the most different from a normal “great revenue” quarter:
- Capital expenditures hit $31.1 billion for the quarter alone — nearly double what Meta spent in Q2 2025, and more than Meta’s entire operating cash flow minus everything else it needed to fund.
- Free cash flow — the cash left over after running the business and paying for equipment — dropped to $784 million, down from $8.5 billion a year ago and $12.4 billion just last quarter.
- Share buybacks paused entirely this quarter: $0, compared to $22.9 billion in the first half of 2025.
- Debt climbed to $83.7 billion, and Meta announced a new financing partnership with BlackRock this quarter to help fund a data center — a sign that even a company generating tens of billions in operating cash flow is reaching for outside capital to keep building at this pace.
None of this means Meta is short on cash — it still holds $90.3 billion in cash and marketable securities. It means Meta chose to point nearly all of its cash generation at AI infrastructure this quarter, instead of returning it to shareholders.
What guidance says
Guidance is often more informative than the quarter itself, because it’s management telling you what they expect next, in their own words:
- Q3 2026 revenue: $61–64 billion — a $62.5B midpoint that’s about 1% below the ~$63.1B analysts were modeling.
- Full-year 2026 expenses: raised to $165–169 billion, specifically to absorb the legal charge.
- 2026 capital expenditures: narrowed to $130–145 billion — up from the low end of the prior $125–145 billion range. Narrowing a range upward means more spending is now locked in, not less.
- Tax rate: raised to 15–17%, up from a prior 13–16% outlook.
Every piece of forward guidance points the same direction: more spending, more taxes, similar revenue growth. Meta isn’t signaling a slowdown in its AI bet — if anything, it’s signaling the opposite.
The rating
Scoring the quarter across five dimensions, 1–5 each:
| Dimension | Score | Why |
|---|---|---|
| Growth | 5/5 | Revenue +28%, impressions +14%, price/ad +12%, ARPP +23% — every growth lever moved in the same direction |
| Profitability | 2.5/5 | Operating margin fell to a two-year low; even excluding one-time charges, cost growth is outpacing revenue growth |
| Cash discipline | 2/5 | Free cash flow down 91% YoY; buybacks paused; needed outside financing (BlackRock) to help fund infrastructure |
| Guidance confidence | 3.5/5 | Reasonable revenue range, but expense floor, capex floor, and tax-rate guidance were all raised |
| Narrative credibility | 3.75/5 | The core-ads story is well-backed by hard numbers; the enterprise/agents/compute-selling pitch is still mostly “we’ll share more soon” |
Overall: 3.35 / 5 → B-. A genuinely excellent advertising business is funding an extremely expensive, not-yet-proven AI bet. If you only looked at revenue, this was an A quarter. If you only looked at free cash flow, this was closer to a D. The honest grade sits in between, because both of those things are simultaneously true.