Shares of Meta Platforms surged 5.8% to $589.00 on August 7, extending a sharp rebound from the post-earnings low of $521.48 hit after the company reported Q2 2026 results on July 29. Meta posted earnings per share of $6.18, badly missing the $7.14 consensus estimate, then raised its full-year capital expenditure guidance. The stock is now up roughly 13% from its trough, but the fundamental tension between red-hot revenue growth and ballooning costs remains unresolved.

  • Revenue Keeps Growing, but Profits Are Getting Eaten Alive. Despite revenue growing 28% to $60.8 billion, EPS missed consensus by 13.8% due to high legal and severance charges.

Stripping out $2.4 billion in legal charges and $1.2 billion in severance, operating income was roughly flat year-over-year — meaning the ad business is healthy, but one-time costs are masking it. Shareholders need to decide whether those "one-time" items keep recurring.

  • Free Cash Flow Nearly Vanished — That's the Real Red Flag. Free cash flow collapsed from $8.5 billion to just $784 million as Meta generated $31.9 billion in operating cash flow, nearly all consumed by $31.1 billion in capital expenditures.

Meta has now increased capex guidance twice for 2026, raising the lower bound to $130 billion from under $100 billion at the start of the year. That means the company is spending almost every dollar it earns on AI data centers before paying dividends or buying back stock.

  • Wall Street Says Buy the Dip — Amazon Helped. Wall Street has broadly urged investors to buy the dip, with 62 analysts rating META a Strong Buy and Cathie Wood purchasing $14.3 million of stock after the selloff.

Meta rebounded after Amazon's cloud results improved sentiment toward large AI infrastructure programs. Amazon's ability to show accelerating cloud revenue alongside huge spending gave investors a template for justifying Meta's approach — even though Meta is currently the only major big spender without a cloud business it can point to as proof its AI spending earns money outside advertising.

  • The Core Question: When Does Spending Become Revenue? The controversy around high capex is the timing of revenue recognition — data centers and chips hit the cost line now, while ad revenue improvements from better AI models arrive gradually. Operating margins have already compressed from a peak near 48% to around 41%. If Meta cannot demonstrate that AI spending is translating into measurably better ad targeting and pricing power by mid-2027, today's rebound could look premature.