Meta second quarter 2026 earnings explained: segments, EPS and valuation multiples

Meta Platforms reported its second quarter 2026 results on July 29, 2026. It has since reported its third quarter, on October 21, 2026, and a separate Dalsna Finance article covers those results. This article looks back at the three months ended June 30, 2026 and compares them with the first quarter. Revenue rose 8.0% from the quarter before (Dalsna Finance calculation), while net income fell to $15,848 million from $26,773 million, as reported by Meta. Every figure is sourced and dated, and every number worked out by us is labelled as a Dalsna Finance calculation. ^[1][2][3]

Meta in brief

Meta Platforms, Inc. owns Facebook, Instagram, Messenger and WhatsApp and sells virtual reality headsets and AI glasses. Facebook launched in 2004. Its Class A common stock trades on the Nasdaq under the ticker META, and it also has Class B common stock, which is not listed. Meta had a headcount of 75,472 at June 30, 2026, down 1% from a year earlier. Meta said that figure still counts about 8,000 employees affected by a headcount reduction in May 2026, most of whom it expected to leave its count by the end of the third quarter. ^[1][4]

In the release, founder and chief executive Mark Zuckerberg said AI is speeding up Meta's core business, driving its next products and opening new enterprise opportunities. This is a paraphrase of his words, as stated in the company's release. ^[1]

Two segments

Meta reports two segments. Family of Apps covers Facebook, Instagram, Messenger, WhatsApp and other services, and earns almost all of its money from advertising. Its other revenue includes paid messaging on WhatsApp and subscriptions. Reality Labs covers Meta's virtual and augmented reality hardware, software and content, and its revenue comes from products such as Meta Quest and AI glasses. ^[1][4]

Family of Apps revenue rose to $60,370 million from $55,909 million in the first quarter, but its operating income fell to $23,394 million from $26,900 million. Against the second quarter of 2025, the quarterly report puts the rise in Family of Apps costs down primarily to higher employee pay including severance, data center and cloud infrastructure, legal related costs and AI tokens bought from third parties. Reality Labs had revenue of $431 million and an operating loss of $4,619 million, against a loss of $4,028 million in the first quarter. Against a year earlier its revenue rose 16%, which the report credits to higher sales of AI glasses, partially offset by lower Meta Quest sales. ^[1][2][4]

Where the revenue comes from

Advertising was $59,363 million of the second quarter's $60,801 million of revenue. Meta does not give the number of ads or their price in dollars. It gives the change from a year earlier instead: ad impressions across its apps rose 14% and the average price per ad rose 12%, against rises of 19% and 12% in the first quarter. Against the second quarter of 2025, total revenue rose 28%, and the quarterly report says the rise in Family of Apps revenue was almost entirely driven by advertising. By where users are, revenue grew 32% in the United States and Canada, 24% in Europe, 19% in Asia Pacific and 36% in the rest of the world. ^[1][2][4]

Meta's main user measure is Family daily active people, the number of people who used at least one of its apps on an average day. It was 3.60 billion on average for June 2026, up 3% from a year earlier, against 3.56 billion for March 2026, as reported by Meta. ^[1][2]

The numbers, quarter over quarter

Revenue was $60,801 million in the second quarter, against $56,311 million in the first. Gross profit, which is revenue minus the direct cost of what was sold, rose 7.3% to $49,471 million. Operating income, which also takes off research, selling and administrative costs, fell to $18,775 million from $22,872 million. Net income under GAAP, the standard US accounting rules, fell to $15,848 million from $26,773 million (Dalsna Finance calculation for gross profit and the changes). ^[1][2]

Profit margin is net income as a share of revenue: 26.1% in the second quarter against 47.5% in the first (Dalsna Finance calculation: $15,848 million divided by $60,801 million, and $26,773 million divided by $56,311 million). The operating margin, operating income divided by revenue, was 30.9% against 40.6%. ^[1][2]

Two things explain most of the gap. First, the first quarter's net income was lifted by tax. Meta booked an income tax benefit of $8.03 billion in that quarter, which it said partly offsets a $15.93 billion non cash tax charge from the third quarter of 2025, and its total tax line was a benefit of $5,021 million. Meta said that without the benefit first quarter diluted EPS would have been $3.13 lower. Second, second quarter costs carried charges of their own. General and administrative costs include $2.40 billion of charges related to legal proceedings, and employee pay includes $1.18 billion of severance tied to the May 2026 headcount reduction of about 8,000 employees. ^[2][1][4]

Against the second quarter of 2025, revenue was up 28% from $47,516 million, but operating income fell 8% from $20,441 million and net income fell 14% from $18,337 million, as reported by Meta. For Family of Apps, the quarterly report says costs rose primarily because of employee pay including severance, data center and cloud infrastructure, legal related costs and AI tokens bought from third parties. ^[1][4]

Earnings per share

Earnings per share, or EPS, is profit divided by the number of shares. The diluted figure also counts shares that could be created from stock awards and similar instruments. Meta reported diluted EPS of $6.18 for the second quarter and $10.44 for the first. Dividing net income by the diluted share count gives the same figures. ^[1][2]

Meta reports no adjusted net income and no adjusted EPS. Its own non GAAP measures are free cash flow and revenue excluding the effect of currency moves. Meta works out free cash flow as the cash its operations brought in minus purchases of property and equipment and principal payments on finance leases. In the second quarter operations brought in $31,862 million, property and equipment cost $30,116 million and finance lease payments were $962 million, leaving $784 million. So this article uses free cash flow as its second measure and calls it by that name. Per share, on the 2,547,506,225 shares on the cover of the second quarter report, it was $4.86 in the first quarter and $0.31 in the second (Dalsna Finance calculation). It is a cash measure, not earnings. ^[1][2][4]

What the market values Meta at

Market capitalization, or market cap, is what the stock market values the whole company at: the share price times the number of shares. Meta's Class A shares closed at $614.99 on Friday, October 30, 2026, as reported by StockAnalysis. The cover of its second quarter report to the SEC lists 2,205,128,509 Class A shares and 342,377,716 Class B shares outstanding as of July 24, 2026, or 2,547,506,225 in all. Counting both classes at the Class A price gives a market cap of about $1.57 trillion (Dalsna Finance calculation). Class B shares are not listed, so this is an approximation. Every multiple and share price below uses this one share count. ^[5][4]

Keep the timing in mind. The price is from after the third quarter results came out, so it reflects news that is not in this article, including stock offerings Meta launched in October 2026 and changes to its share structure it has announced, which the third quarter article describes. The earnings behind every multiple stop at June 30, 2026, and the share count is the one on the second quarter report. The multiples below are therefore today's price set against the second quarter's numbers, not a current valuation on the latest results. ^[5][3][6][4]

Six valuation multiples

The price to earnings ratio, or P/E, is market cap divided by a year of earnings. It shows how many dollars the market is paying for each dollar of yearly profit. Annualised means one quarter multiplied by four, so it assumes the second quarter's conditions lasted a full year. Net income of $15,848 million times 4 is $63,392 million, which gives an annualised P/E of 24.7 (Dalsna Finance calculation). ^[1][5][4]

The second measure divides market cap by free cash flow. We call it market cap to free cash flow, because free cash flow is not earnings. Free cash flow of $784 million times 4 is $3,136 million, which gives 499.6 (Dalsna Finance calculation). The figure is so high because spending on property and equipment took up almost all of the quarter's operating cash. ^[1][5][4]

A forward P/E uses an estimate of future earnings. Barchart reported on October 21, 2026, after the second quarter results and before the third, that analysts expect EPS of $27.95 for 2026. Multiplying that by the same 2,547.5 million shares gives estimated earnings of about $71,203 million and a forward P/E of 22.0 (Dalsna Finance calculation on an estimate, analyst consensus as reported by Barchart). Barchart compared it with EPS of $29.69 for 2025, while Meta reported diluted EPS of $23.49 for that year, so the estimate looks to be on an adjusted basis that we cannot match to Meta's figures. We found no published estimate of free cash flow, so there is no forward market cap to free cash flow. ^[7][8][5][4]

A trailing P/E, sometimes called a historical P/E, uses the last four reported quarters, here the twelve months to June 30, 2026. Net income over that period added up to $68,098 million, which gives a trailing P/E of 23.0. Free cash flow over the same four quarters added up to $37,872 million, which gives a trailing market cap to free cash flow of 41.4 (Dalsna Finance calculation). ^{[9][8][2][1][5][4]}

The last four quarters

Meta's releases give net income and free cash flow for each of the four quarters from the third quarter of 2025 to the second quarter of 2026. Tax moved two of them a long way. The third quarter of 2025 carried a one time, non cash income tax charge of $15.93 billion, and the first quarter of 2026 carried the $8.03 billion income tax benefit described above. Both sit inside the trailing total. The sums are a Dalsna Finance calculation, and Meta's own first half 2026 free cash flow of $13,170 million matches its two quarters. ^[9][8][2][1]

Three base cases: the second quarter held flat for a year

Suppose revenue stayed at the second quarter's level for a full year, with no growth and no decline: $60,801 million times 4, or $243,204 million. The first base case keeps the 26.1% profit margin, which gives earnings of $63,392 million, or $24.88 per share on the cover share count. This case is simply the second quarter annualised, so at the annualised P/E it returns the October 30, 2026 close of $614.99 by construction. The other cells only show how the price moves when the same earnings are given a different multiple. ^[1][5][4]

The second base case uses the 30.9% operating margin as reported, which leaves out interest, taxes and other income: $75,100 million a year, or $29.48 per share (Dalsna Finance calculation). Operating income is counted before tax, so this is not net income. It is shown so the case sets aside the second quarter's interest, other income and taxes, and to match the operating margin case in our third quarter article. ^[1][4]

The $2.40 billion of legal charges and $1.18 billion of severance stay in both cases. Meta put figures on them but did not call them one time items or say what operating income would have been without them, and the quarterly report lists legal related costs among the reasons costs rose, so we only point them out and do not take them out. ^[1][4]

The third base case holds free cash flow flat: $784 million times 4, or $3,136 million, which is $1.23 per share. It meets only the market cap to free cash flow multiples, and the earnings cases meet only the P/E multiples. At the annualised multiple it returns the October 30, 2026 close by construction. There is no forward free cash flow multiple, so that column is left out. ^[1][5][4]

The free cash flow base case in a chart

Legal matters at the time

The quarterly report describes a run of youth related cases. In the first of the state attorney general cases to go to trial, brought by New Mexico, a jury on March 24, 2026 ordered Meta to pay a civil penalty of $375 million. After a bench trial in May 2026 the state was seeking $953 million in abatement costs and a broad set of injunctive terms, with no decision yet. Trial in Tennessee's case began on July 20, 2026, and the first trial of state attorney general claims in the multidistrict litigation was set for August 12, 2026. ^[4]

A separate New Mexico case is not one of the youth cases. The report places it among the matters over Meta's platform and user data practices, and says it has expanded to include claims about content moderation. Its trial was set for September 8, 2026, and the report says the state has indicated it intends to seek up to $62.85 billion in penalties. ^[4]

What came next

At the time, Meta's own outlook, a company projection, was third quarter 2026 revenue of $61 billion to $64 billion, assuming foreign currency would be a headwind of about 1% to growth from a year earlier, full year 2026 total expenses of $165 billion to $169 billion and 2026 capital expenditures, including principal payments on finance leases, of $130 billion to $145 billion. Meta also said it expected 2026 operating income to be above its 2025 level. The quarterly report adds that in July 2026 Meta signed data center leases with obligations of about $68 billion, expected to start in 2027 and 2028. ^[1][4]

Meta released its third quarter results on October 21, 2026. They are covered in a separate Dalsna Finance article, which is the place to look for how revenue and spending compared with that outlook and for later developments in the legal cases above, which the third quarter report describes. This article does not use any third quarter figures. ^[3][10]

How these figures were made: inputs come from Meta's earnings releases for the third and fourth quarters of 2025 and the first and second quarters of 2026 and its second quarter 2026 quarterly report on SEC EDGAR, plus the dated closing price and the dated consensus report named above. Calculations use unrounded inputs and are rounded only at the end, with multiples to one decimal and per share figures and prices to the cent. ^{[9][8][2][1][4][5][7]}