Meta $META drops nearly 9% as free cash flow falls to $784M

$784M of free cash flow is the number behind Meta $META’s near-9% post-earnings stock decline. Meta’s Q2 2026 earnings release showed revenue of $60.80B, up 28%, but capital expenditures of $31.08B absorbed most of the $31.86B in operating cash flow.

The operating business still grew quickly. Family daily active people averaged 3.60B in June, ad impressions rose 14%, and average price per ad increased 12%. The market reaction came from the cost side: total costs and expenses rose 55% to $42.03B, including $2.40B of legal-proceeding charges and $1.18B of severance expenses tied to the May 2026 headcount reduction.

Metric | Q2 2026 | Change / context
Revenue | $60.80B | +28%
Total costs and expenses | $42.03B | +55%
Capital expenditures | $31.08B | AI infrastructure load
Free cash flow | $784M | Down from $8.55B year earlier

Guidance kept the same tension in place. Meta expects Q3 revenue of $61B-$64B and now sees 2026 total expenses of $165B-$169B. Capital expenditures, including principal payments on finance leases, are expected at $130B-$145B, narrowed from the prior $125B-$145B range.

The finance question is whether advertising growth can fund the AI infrastructure cycle without compressing free cash flow further. The next checkpoint is Q3 revenue versus the $61B-$64B range and any change to the $130B-$145B capex plan. Until those numbers move, investors are likely to treat AI capacity spending as the valuation variable.

Not investment advice. Verify all figures with primary sources before acting.