Meta Platforms

The operating margin fell in Q2 to 31% from 43%, because costs rose 55% (incl. $2.4bn for lawsuits and severance after 8,000 layoffs in May). The TTM margin is 38.1% vs 41.4% (2025) and 42.2% (2024). 2026 cost guidance has been raised to $165–169bn, and analysts expect only +4% EPS in 2026 vs +26% revenue: bigger, not stronger.

ROIC has fallen from 43.9% (2024) to 31.3% (2025) and 25.4% TTM, and ROCE from 28.6% to 22.1%. Capex of $89bn TTM vs depreciation of $22.7bn means depreciation will squeeze returns further in the coming years. Still far above a WACC of 10.5%.

Reality Labs lost $4.6bn in Q2 ($4.5bn a year earlier) on revenue of about $2.3bn a year; the loss has been around $18–20bn a year for several years with no improvement.

Trailing P/E 27.0 vs 13.6–27.5 in 2021–25 (the 2025 figure was lifted by a one-off tax charge, so the old claim of 'highest in 6 years' does not quite hold); forward P/E 22.2 vs 16.4–24.7, i.e. mid-range; EV/EBITDA 16.8 vs 7.1–17.2, at the top; P/FCF 44.5 vs 16.4–36.1 is the highest ever, and consensus expects negative FCF (−$6.5bn) in 2026. FCF yield 2.25%. Reasonable on earnings, expensive on cash flow.

FCF in Q2 was only $784m ($8.5bn a year earlier), because capex almost doubled to $31.1bn. 2026 capex guidance is $130–145bn vs operating cash flow of about $130bn TTM, and consensus expects negative FCF for the whole of 2026.

From net cash of $28.8bn (2024) to net debt of $22.1bn; $54.8bn of new debt over the last 12 months, and long-term debt is $83.7bn. On top comes the Hyperion data centre ($27bn), which sits off balance sheet in a JV with Blue Owl (80%), but where Meta has given a 16-year residual-value guarantee.

A New Mexico jury ordered Meta to pay $375m in March, and in August Meta became the first social network declared a 'public nuisance' and was ordered to pay $567m into a fund and tighten teen accounts. Meta is appealing. Management itself writes that several youth lawsuits in the US this year 'may ultimately result in a material loss', and Q2 carried $2.4bn of legal and severance costs.

The September rally of about 30% rests on the AI agent Muse, which has no revenue yet. The stock fell 4.8% on 28/9 when OpenAI's competing 'o' agent and Meta's own enterprise launch made the market reprice; the share price is 8% below its $779 peak.

Zuckerberg-related entities (CZI Holdings and Chan Zuckerberg Biohub) sold 27,474 shares for $21.4m at about $777 on 24/9, near the top, under a 10b5-1 plan; continuous selling and no insider buying.

Q2 revenue rose 28% to $60.8bn with both 14% more ad impressions and a 12% higher price per ad; millions of advertisers and 3.6bn daily users. Q3 guidance $61–64bn.

The share count has fallen 1.1% in a year; buybacks ($21.4bn) and dividends ($5.4bn) TTM are below FCF of $41.0bn. But no shares were bought back in Q2, and with negative FCF ahead, buybacks are effectively debt-funded.