Meta Drops 5% on Missed EPS, Weak Guidance
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- Meta shares dropped more than 5% in extended trading after EPS of $6.18 missed the $7.22 analyst estimate, while revenue guidance of $61-64 billion (midpoint $62.5B) came in below the $63.15 billion Wall Street expected.
- Free cash flow cratered to $784 million from $8.55 billion a year earlier as Meta funnels cash into AI infrastructure.
- Capex guidance narrowed to $130-145 billion (from a prior $125-145 billion range), and total costs and expenses surged 55% year-over-year to $42.03 billion, including $2.4 billion in legal charges and $1.18 billion in severance tied to layoffs that began in May.
- Net income fell 13% to $15.85 billion from $18.34 billion a year earlier.
- Reality Labs posted a $4.6 billion operating loss on $431 million in revenue — a smaller loss than the $5.07 billion analysts had forecast.
- Daily active people came in at 3.6 billion, just below the 3.61 billion Street estimate, while Meta earlier this month debuted its Muse Spark 1.1 model, which AI chief Alexandr Wang called the "strongest model for agentic and coding work yet" at a cheaper price than OpenAI and Anthropic offerings.
Why it matters: Meta's AI infrastructure buildout is now hitting the bottom line: free cash flow collapsed from $8.55 billion to $784 million in a single quarter while total costs jumped 55% and capex guidance sits at $130-145 billion — investors wanted stronger revenue guidance (they expected $63.15 billion, got a $62.5 billion midpoint) to justify the spending, and the EPS miss of $1.04 per share tells them monetization has not caught up yet.
