Meta Tightens Capex Range Upward, Signals Unwavering AI Commitment
<cite index="29-9">Meta Platforms reported second-quarter (Q2) 2026 revenue of $60.80 billion, up 28% year-over-year.</cite> The result <cite index="30-2">edged past the $60.29 billion consensus, yet diluted earnings per share (EPS) of $6.18 missed the $7.22 estimate by 14.42%, snapping a six-consecutive-quarter streak of beating EPS expectations.</cite>
<cite index="30-3">The primary culprit was a 55% spike in total costs and expenses to $42.03 billion, amplified by $2.40 billion in legal charges and $1.18 billion in severance tied to an 8,000-employee headcount reduction, compressing operating margin to 31% from 43% a year ago.</cite> <cite index="31-9">Excluding the legal charges and severance expenses, Meta's operating income for the quarter would have increased 9% year-over-year, chief financial officer Susan Li said on the investor call.</cite>
Capex Floor Raised; Free Cash Flow Collapses
<cite index="4-7">The company narrowed its full-year 2026 capital expenditure (capex) guidance to a range of $130 billion to $145 billion, up from a prior range of $125 billion to $145 billion.</cite> <cite index="5-4,5-5">The narrowing of the forecast is itself a signal: by raising the low end of the range rather than the high, Meta is effectively promising that spending will not come in light—a commitment to the build-out even as the returns remain uncertain.</cite>
<cite index="18-1,18-2">Meta entered 2026 guiding to $115–$135 billion in capital expenditures; after Q1 2026 earnings on April 29, it raised that range to $125–$145 billion, citing higher component pricing and additional data center costs.</cite> The latest revision marks the second upward adjustment in a single year. <cite index="16-6,16-7">Last year, Meta spent $72.2 billion on capex; the company is now guiding to nearly double what it spent in 2025, and more than it spent in 2025 and 2024 combined.</cite>
The cash flow impact has been severe. <cite index="9-4">Operating cash flow rose 25% to $31.86 billion, but free cash flow fell to $784 million from $8.55 billion a year earlier.</cite> <cite index="4-5,4-6">On a year-to-date basis, Meta had invested $50.9 billion through the first half of 2026, compared to $30.7 billion in the same period of 2025, with spending relating primarily to data center construction, server purchases, and artificial intelligence (AI) chip procurement.</cite>
<cite index="30-4">Advertising revenue grew 27% to $59.36 billion as daily active people across the Family of Apps climbed 3% to 3.60 billion.</cite> <cite index="29-13">Ad impressions grew 14% and average price per ad increased 12% year-over-year.</cite>
El Paso Joint Venture with BlackRock
One day before the earnings release, Meta unveiled a major off-balance-sheet infrastructure deal. <cite index="19-1">Meta Platforms and BlackRock plan to build a 1-gigawatt data center complex in Texas that will cost about $14 billion to develop, adding to a wave of investment in the computing hubs that power artificial intelligence.</cite> <cite index="19-3,19-4">The facility will go online in 2028 with Meta as the initial sole tenant; BlackRock funds will hold an 80% interest in the joint venture, while Meta will retain the remaining 20%.</cite>
<cite index="24-3,24-4,24-5">At financial close, Meta will transfer land and partially built construction assets worth around $2.3 billion into the venture, while BlackRock is set to put in roughly $4.9 billion in cash; Meta will also receive a one-time distribution of approximately $1 billion to align ownership stakes, with a portion of BlackRock's investment funded through $12.5 billion in debt financing.</cite> <cite index="20-10">The El Paso project is part of Meta Compute, the company's initiative to build out AI infrastructure and sell access to excess computing power.</cite>
Sector Context and Forward Guidance
<cite index="8-7,8-8">Alphabet's July 22 print saw its stock drop 7% after a capex raise came with negative free cash flow for the first time since its 2004 IPO.</cite> <cite index="5-6,5-7">The pattern is not Meta's alone: across Big Tech, the second-quarter numbers have told a similar story of surging AI investment outrunning the cash it generates, a bet the whole industry has made at once.</cite>
<cite index="9-8,9-9">Meta expects third-quarter revenue of $61 billion to $64 billion and full-year expenses of $165 billion to $169 billion, and maintained its forecast for 2026 operating income to exceed the 2025 result despite the higher spending outlook.</cite> <cite index="34-13">Management said it is focused on maximizing capacity in 2026 and 2027, while keeping flexibility for 2028 and beyond.</cite> <cite index="29-14">Cash, cash equivalents, and marketable securities totaled $90.26 billion as of June 30, 2026, against long-term debt of $83.66 billion.</cite>