Meta Platforms experienced a significant decline of 8.9% following the release of its second-quarter fiscal 2026 earnings report. The company posted diluted earnings per share of $6.18 for the quarter, marking a 13% year-over-year decrease and falling well short of the analyst consensus of $7.22.

Total revenue for the quarter rose 28% year-over-year to $60.8 billion, surpassing the market's consensus estimate of $60.17 billion. However, total costs and expenses surged by 55% to $42.03 billion. This figure includes $2.4 billion in legal-related expenses and $1.18 billion in severance costs from layoffs in May. Excluding these two one-time items, earnings would have exceeded market expectations. The company's operating margin fell to 31% from 43% in the same quarter last year.

The core issue centered on capital expenditure. Capital spending for the quarter hit a massive $31.08 billion. While net cash from operating activities rose 25% year-over-year to $31.9 billion, the high capital expenditure dragged free cash flow down to just $784 million. In contrast, free cash flow was a robust $8.55 billion in the same period last year. The company issued $24.91 billion in new long-term debt, pushing its total long-term debt from $58.74 billion at year-end to $83.66 billion. Share repurchases were completely halted during the quarter, compared to $10.17 billion in buybacks during the same quarter last year.

Reality Labs, the company's metaverse division, generated only $431 million in revenue while posting a loss of $4.62 billion. The company provided third-quarter revenue guidance in the range of $61.0 billion to $64.0 billion, with the midpoint falling below analyst expectations. The full-year capital expenditure range was revised upward from the previous $125 billion to $145 billion to a new range of $130 billion to $145 billion. Chief Executive Officer Mark Zuckerberg stated that current computing power supply is far from meeting total market demand.