Meta Shares Tumble on Soaring AI Costs and Disappointing Guidance

Meta Platforms (META) stock tumbled 8.6% in after-hours trading Wednesday, falling to $535 after its Q2 2026 earnings report revealed a significant earnings miss and a weaker-than-expected outlook that amplified investor concerns about the company's aggressive spending on artificial intelligence.

Earnings and Guidance Disappoint

While Meta's second-quarter revenue of $60.8 billion slightly surpassed analyst expectations, its diluted earnings per share (EPS) came in well below forecasts. The company reported an EPS of $6.18, missing the consensus estimate of $7.22 by approximately 14% and marking a 13% decline from the same period last year.

The company's forward-looking guidance also soured investor sentiment. For the third quarter of 2026, Meta projected revenue with a midpoint of $62.5 billion, falling short of Wall Street's consensus of roughly $63.15 billion.

Soaring Costs and Margin Pressure

The earnings miss was driven by rapidly escalating costs. According to the report, profitability was weighed down by a combination of factors, including:

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• $2.4 billion in legal charges.
• Severance costs related to a headcount reduction in May 2026.
• A staggering $31 billion in capital expenditures during the quarter alone.

This spending surge caused Meta's operating margin to collapse to 31% from 43% a year earlier, a clear signal that expenses are growing much faster than revenue. The company also raised its full-year total expense forecast to a range of $165–$169 billion, crystallizing fears that its $125–$145 billion AI infrastructure plan is severely pressuring near-term profitability.

Market Reaction and Context

The sharp after-hours decline follows a nine-session losing streak for the stock, as investors were already on edge about the company's spending plans. The disappointing report landed in a fragile market environment, with fresh uncertainty around the Federal Reserve's interest rate policy and rising oil prices adding to broader headwinds for technology stocks.

The combination of the EPS miss, margin compression, and below-consensus guidance sent the stock toward its 52-week low, as investors repriced the shares to account for the mounting costs of Meta's long-term AI ambitions.