The market is overreacting to Meta's earnings and guidance. Here's our plan
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- Meta Platforms shares slid more than 11% in extended trading Wednesday after Q2 adjusted EPS fell 13.4% YoY to $6.18, missing the $7.22 consensus estimate per LSEG
- Meta's Q2 revenue rose 28% YoY to $60.8 billion, beating the $58.7B analyst consensus, while Q3 revenue guidance of $61B-$64B came in at the midpoint versus $63.15B expected
- Meta's EPS miss stemmed from $3.58B in one-time charges ($2.4B legal, $1.18B severance); excluding them, adjusted operating income would have been $22.355B at a 36.77% margin — both beats
- Meta raised its full-year capex range to $130B-$145B from $125B-$145B, lifting the midpoint to $137.5B and exceeding the Street's $134.56B FactSet projection
- Free cash flow dropped about 91% YoY despite 25% growth in operating cash flow; CEO Mark Zuckerberg said others have offered to rent Meta's compute at "a meaningful premium over what we paid"
- The CNBC Investing Club is reiterating its 1 rating on META but cutting its price target to $700 from $750, wanting to wait for sellers to finish
- Meta's apps hit fresh milestones: Instagram reached 2B daily actives, Threads crossed 500M monthly actives, and family-of-apps "other revenue" hit $1B for the first time, up 73% YoY per CFO Susan Li
Why it matters: Meta's $3.58B in one-time legal and severance charges masked an underlying beat: excluding them, adjusted operating income would have hit $22.36B at 36.77% margins on revenue that topped consensus by over $2B. But with free cash flow down 91% YoY and full-year capex guidance lifted to a $145B high end, Meta now joins other hyperscalers under the AI-spend backlash — forcing the Investing Club to trim its price target by $50.
