Meta shares dropped after the company reported second quarter results that beat revenue expectations but missed earnings per share and showed free cash flow nearly vanishing. Revenue reached $60.80 billion, above the $60.17 billion forecast, while EPS of $6.18 fell short of the $7.22 estimate. Guidance for the current quarter came in below Wall Street expectations. Capital expenditures surged to $31.1 billion, driving free cash flow down to just $784 million from $8.55 billion a year ago. The stock fell as much as 7.45% in after-hours trading, extending its year-to-date decline to 11%.
Meta shares dropped after the company posted second quarter results that beat on revenue but showed free cash flow nearly disappearing. Revenue came in ahead of expectations, but the gap between a strong top line and a thin cash position has investors questioning whether Meta stock is a buy or sell.
Earnings per share landed at $6.18, missing the $7.22 analysts polled by LSEG expected. Revenue reached $60.80 billion against a forecast of $60.17 billion, so the top line actually beat estimates. Guidance for the current quarter came in soft, between $61 billion and $64 billion, with a midpoint of $62.5 billion below the $63.15 billion Wall Street had modeled.
Daily active people hit 3.6 billion, just under the 3.61 billion estimate. Net income slid to $15.85 billion from $18.34 billion a year earlier. Shares dropped as much as 7.45% right after the report, adding to an 11% decline for the year even as the Nasdaq climbed about 5%.
Operating cash flow held up at $31.9 billion, nearly flat with the $32.2 billion in the first quarter. Capital expenditures hit $31.1 billion, a jump of more than 50% from the prior quarter, driven by Meta AI spending on data centers. Subtracting that from operating cash flow leaves Meta free cash flow at just $784 million, down from $8.55 billion a year ago and $12.4 billion in the first quarter.
Meta narrowed its full year capital expenditure guidance to a range of $130 billion to $145 billion, raising the low end by $5 billion. Through June, the company had already spent an estimated $50.9 billion. Mark Zuckerberg, CEO of Meta, said, “We also expect to grow a large business serving large customers as well.”
Ad impressions rose 14% year over year and the average price per ad climbed 12%, though revenue growth decelerated from 33% in the first quarter to 28% in the second. Meta closed the quarter with $90.3 billion in cash and marketable securities, and shares were trading at roughly 20 times earnings after the drop, below the S&P 500’s multiple of about 28.
Meta also struck a $14 billion data center venture with BlackRock in El Paso, Texas, on top of a Hyperion project in Louisiana carrying a price tag above $50 billion and a $9 billion build in Alberta, Canada. The spending story is far from over, and whether the stock looks cheap or expensive depends on how long free cash flow stays thin and whether advertising keeps growing at a pace that can justify it.
