Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 29, 2026 · Beat 7 of last 7 quarters
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Meta's aggressive CapEx raise and new 1GW data center venture with BlackRock underscore the accelerating AI infrastructure buildout, with demand outstripping supply. The company's emphasis on maximizing 2026-27 capacity and securing long-term land/power signals sustained hyperscale investment, which will drive demand for suppliers across chips, networking, and energy. Meta's move to potentially sell compute directly adds a new demand source to the market, potentially tightening supply further.
Q2 revenue grew 28% YoY to $60.8B, with ad revenue up 27% and Family of Apps other revenue crossing $1B for the first time (+73% YoY). Operating income declined 8% YoY to $18.8B due to $2.4B legal charges and $1.2B severance, but excluding those, operating income rose 9%. Headcount fell 3% QoQ to ~75,000 after the May reduction. CapEx was $31.1B, and free cash flow was $784M. AI-driven improvements drove a 15 bps increase in Instagram sessions, an 8.3% increase in ad clicks, and a 15.7% uplift in Facebook conversions; Advantage+ reached a $75B annual revenue run rate.
Meta raised the lower end of its full-year 2026 expense guidance to $165B-$169B, incorporating the $2.4B legal charge, and narrowed 2026 CapEx guidance to $130B-$145B (from $125B-$145B). Q3 2026 revenue is guided to $61B-$64B, with FX a ~1% headwind. Management emphasized maximizing 2026-2027 capacity, citing demand-constrained conditions and the need to build out supply chains, while maintaining flexibility for 2028+ through land and power investments. They expect operating income for 2026 to be above 2025, and raised the tax rate outlook to 15%-17% for remaining quarters. The tone was confident on AI-driven monetization across core ads, business agents, API, and potential compute sales, with a focus on scaling personal agents and enterprise offerings.
“We are now at a point where our investments in AI are accelerating every major part of our core business.”
on AI investment impact
“The broad environment for building infrastructure is dynamic and uncertain in both near-term and longer-term time horizons.”
on Capacity strategy
“We are the only major company building AI with the primary goal of putting superintelligence directly into people's hands.”
on AI philosophy
Which of the new product opportunities (consumer agents, business agents, API, compute rental) do you expect to scale first in '26-'27 to show quantifiable ROIC? And any early comments on 2027 CapEx?
Mark said meaningful growth expected across all areas, with compute sales at a premium but higher margins on selling intelligence. Susan said no specific 2027 CapEx outlook, but plans are geared toward maximizing 2026-27 capacity with flexibility for 2028+.
How much of the enterprise opportunity is an extension of the existing ad business vs. needing new go-to-market? And how are you thinking about sources of capital (debt vs equity) for the build-out?
Mark said business agents are a natural extension of the ad business, while coding/productivity tools are a new muscle. Susan said they are evolving capital structure to include more long-duration debt and partnerships like BlackRock, while maintaining strong operating cash flow.
How far along are you in leveraging LLMs for ranking/recommendations? And how do you reconcile selling compute while also buying capacity from third parties?
Susan detailed continued headroom in recommendations, including LLM content understanding and agentic approaches. Mark said there is nowhere near enough compute for demand, so they are using a portfolio approach—monetizing compute directly when it makes sense while building intelligence on top for higher long-term value.