Meta’s profit fell 14% to $15.8 billion as AI spending and legal charges weighed, while revenue beat estimates.
SAN FRANCISCO: Facebook-parent Meta reported profits on Wednesday that fell short of Wall Street expectations, as the cost of deploying artificial intelligence, along with hefty legal and severance charges, hurt its bottom line.
The social media giant said net income dropped 14 per cent from a year earlier to $15.8 billion. Revenue, however, climbed 28 per cent to $60.8 billion, beating estimates and underscoring the continued strength of its advertising business.
Shares in Meta were down as much as 12 per cent in after-hours trading, a sign of analyst scepticism over the scale of the company’s AI spending.
Its results contrasted with those of Microsoft, which beat analyst expectations on Wednesday, driven by its cloud and AI businesses.
At Meta, the profit decline was driven largely by one-time items, including $2.4 billion in charges tied to legal proceedings and $1.2 billion in severance from a round of layoffs in May.
Meta reaffirmed that it would keep spending heavily on the data centres and chips underpinning its AI effort, telling investors it now expects capital expenditures of $130 billion to $145 billion this year, nearly double what it spent in 2025.
“AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities,” chief executive Mark Zuckerberg said in a statement.
The new opportunities refer to Meta’s plan to launch a cloud computing business that would rent out its vast computing power to outside customers. “We have quite a number of offers at a meaningful premium over what we paid for the (computing power),” Zuckerberg said on a call to analysts.
Unlike rivals Amazon, Microsoft and Google, Meta has never sold cloud services externally.
“Zuckerberg’s optimistic, positive tone on AI’s business possibilities stands in stark contrast to the negative sentiment that’s building toward social media companies over claims that they’ve harmed and addicted kids,” said Emarketer senior analyst Minda Smiley. “This juxtaposition could make it more difficult for Meta to build credibility in an area where it’s already a laggard.”
Meta’s virtual reality division, Reality Labs, posted an operating loss of $4.6 billion in the quarter. Meta has increasingly shifted its hardware focus toward AI-powered smart glasses.
Meta’s AI spending spree has seen its free cash flow fall to $784 million from $8.5 billion a year earlier. A similar AI-related cash burn spooked Wall Street last week when Google reported its latest earnings.
Microsoft on Wednesday reported $90 billion in revenue and $35.8 billion in net income, potentially alleviating investor concerns about whether its AI investments are paying off.
