Meta Platforms Inc. missed second-quarter earnings forecasts on Wednesday, causing its stock to tumble nearly 8% in after-hours trading, despite a media blitz by CEO Mark Zuckerberg touting the benefits of artificial intelligence.
Earnings Miss and Revenue Beat
The company reported earnings per share of $6.18, falling short of the $7.14 expected by Wall Street, according to Bloomberg consensus estimates. Revenue came in at $60.8 billion, slightly above the $60.23 billion analysts had predicted.
Meta also raised its expense forecast for the year, citing $2.4 billion in charges related to legal proceedings in the second quarter. Total expenses are now expected to range from $165 billion to $169 billion, up from the previous range of $162 billion to $169 billion. Capital expenditures for 2026 are projected to be between $130 billion and $145 billion, up from $125 billion to $145 billion, with a significant portion earmarked for AI investments.
Zuckerberg's AI Optimism
In a Wall Street Journal op-ed published Tuesday, Zuckerberg expressed optimism about a future where everyone has access to a super-intelligent machine. He wrote, “As a thought experiment, imagine only one person had a super-intelligent lawyer. He would have an unfair advantage in court. That would lead to a worse society. But now imagine everyone has a super-intelligent lawyer. Justice would be carried out much more fairly and efficiently than it is today.”
However, his message failed to soothe investor concerns about Meta's massive spending on AI infrastructure, which has contributed to a 10% decline in the company's share price year over year. Zuckerberg's PR blitz comes as analysts seek justification for Meta's AI expenditures, which have increasingly burned through free cash flow.
AI Strategy and Competition
Meta has struggled to develop an AI model that rivals OpenAI or Anthropic. However, Bloomberg reported this month that Meta plans to launch a cloud business to sell AI compute, monetizing its AI investments. This news was one of the few factors boosting investor confidence this year.
In interviews with the New York Times and Financial Times, Zuckerberg advocated for decentralizing AI, creating an era of “personalized super-intelligence” where everyone has an AI assistant tailored to their needs. He said, “I think it is literally impossible to have a single benevolent super-intelligence that is simultaneously aligned with everyone at once.” While he did not specify how Meta would achieve this, personalization would likely require users to share more data.
Investor and Analyst Reactions
“Every one of Meta’s major growth lanes now carries a trust toll,” said Mike Proulx, vice-president and research director at Forrester Research. He listed concerns: “AI-generated advertising raises new brand-control concerns, smart glasses create new privacy questions, youth safety remains under intense scrutiny and employee-tracking initiatives spark data-collection backlash.”
Minda Smiley, senior analyst at eMarketer, noted that Zuckerberg's positive tone contrasts with negative sentiment toward social media companies over claims of harming children. “This juxtaposition could make it more difficult for Meta to build credibility in an area where it’s already a laggard,” she said.
Legal Challenges and Regulatory Risks
Meta faces approximately 3,000 lawsuits alleging it deliberately creates addictive products that harm children. These suits have been filed by families, school districts, and state attorneys general. Forty-two states have sued Meta in state courts, with Tennessee's case currently at trial. A separate federal lawsuit brought by 29 attorneys general goes to trial in California next month.
“The shifting regulatory environment is also a major Meta risk,” said Proulx. “Policymakers are more focused on youth wellbeing, addiction and platform safety … Youth restrictions will affect who Meta can reach. That’s a big problem for a company that depends on ad revenue.”
The lawsuits have already resulted in financial losses, with juries finding Meta liable for harming children and awarding millions in damages. Lawyers for the plaintiffs say they will continue seeking high-cost damages until Meta changes its product designs.
