The social media company's net income fell 14% year over year as expenses surged 55%, and its free cash flow shrank to $784 million
Andrej Sokolow/picture alliance via Getty Images
Meta $META Platforms reported second-quarter earnings of $6.18 per share on revenue of $60.80 billion, missing analyst expectations on the bottom line even as sales grew 28% year over year. Analysts had expected earnings of $7.22 per share on revenue of $60.17 billion, according to CNBC.
Net income for the quarter came in at $15.85 billion, down from $18.34 billion in the year-ago period. Total costs and expenses reached $42.03 billion, a 55% increase from the prior year, a figure that included $2.40 billion in legal charges and $1.18 billion in severance expenses stemming from a round of layoffs that started in May, the company said. Free cash flow dropped to $784 million from $8.55 billion in the year-earlier quarter.
The legal charges were recorded in general and administrative expenses. Meta said it is monitoring active legal and regulatory matters that could affect its business, and cited several youth-related social-media trials scheduled for later this year in the U.S. that may result in a material loss. According to CNBC, CFO Susan Li told analysts that stripping out the legal charges and severance costs, operating income would have been 9% higher than in the same quarter a year ago.
Capital expenditures, including principal payments on finance leases, reached $31.08 billion for the quarter. The company lifted the floor of its full-year capital expenditure range by $5 billion to $130 billion, leaving the ceiling of $145 billion in place, the company said. Full-year total expenses are now expected to fall in the range of $165 billion to $169 billion.
For the third quarter, Meta guided for revenue of $61 billion to $64 billion. Analysts had been expecting roughly $63.15 billion.
Reality Labs recorded a $4.62 billion operating loss in the quarter, with the segment bringing in $431 million in revenue. The company's Family of Apps segment, which includes Facebook, Instagram, Messenger, and WhatsApp, generated $23.39 billion in operating income on revenue of $60.37 billion.
Daily active people across Meta's family of apps averaged 3.60 billion in June, up 3% year over year. Ad impressions grew 14% and the average price per ad rose 12%.
"AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities," Meta founder and CEO Mark Zuckerberg said in a statement. Meta stock fell around 10% in after-hours trading Wednesday.
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