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Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth

Reported by Leo Miller. Date Posted: 8/5/2026.

Meta Platforms’ (NASDAQ: META) Q2 earnings distinctly disappointed investors, as demonstrated by the stock’s 8% decline after the report.

Wall Street analysts did not react well to the report either, with many substantially lowering their price targets afterward.

These decreases were also more significant than those following past earnings reports.

However, analysts have not abandoned this Magnificent Seven giant by any stretch of the imagination, with most still pointing to substantial upside ahead.

Meta’s Q2 Report: The Good, the Bad, and the Ugly

Meta managed to beat sales estimates in Q2, with revenue rising 28% year-over-year (YOY). Despite the beat, there were few positive aspects to Meta’s report beyond its revenue growth.

Meta posted a steep earnings-per-share (EPS) miss, driven largely by legal issues that surfaced earlier in 2026, resulting in a multibillion-dollar expense. To make matters worse, the company had to pay for its recent layoffs, incurring more than $1 billion in severance expenses that also put substantial downward pressure on EPS. Although adjusting for these expenses makes Meta’s EPS performance look much less disappointing, they are still real costs to the company.

The company indicated that substantial legal expenses could persist in the future, noting that its youth-related legal issues could result in a material loss.

The negatives did not end there. The midpoint of Meta’s revenue guidance also came in below expectations, an outcome that is particularly unfavorable given the firm’s massive AI spending. Additionally, Meta beat sales estimates by the smallest margin among hyperscalers in Q2.

Meta continues to grow at an annual rate of more than 25%, a strong pace for a company of its size. However, with such significant AI spending helping drive this growth, markets are unlikely to give the firm the benefit of the doubt when key metrics fall short. Analyst price targets indicate that sell-side analysts may also be reducing the amount of leeway they are willing to give Meta.

Meta Price Targets Take a Big Hit

The MarketBeat consensus price target for Meta sits near $790, a figure that implies significant upside potential of more than 30%. However, the picture looks less aggressive when measured against analysts’ more recently updated targets following the company’s report. Other current target averages sit closer to the mid-$700s, implying upside in the high-20% range rather than the low-30% range.

This comes as analysts substantially lowered their targets after Meta’s report. Based on MarketBeat’s historical data, the average price target decreased by more than 10%, marking a bigger decline than the shares themselves. Some of Meta’s most bullish analysts cut their price targets by more than $100. This includes Rosenblatt and Susquehanna. Rosenblatt previously had a $1,015 target on Meta but lowered it by 13% to $883. Susquehanna’s decrease was even more drastic, with its target falling 28% from $900 to $650.

Analysts have often moved their price targets along a trajectory similar to Meta’s post-earnings price action. However, in many of these instances, price target movements have been relatively favorable, rising more when Meta gains and falling less when it declines.

It is noteworthy that the percentage decrease in targets was slightly greater than the actual decline in Meta’s shares. This indicates a greater deterioration in analyst sentiment after the report compared with past quarters. Still, analyst ratings provide some solace, with Meta having 39 Buy, eight Hold and zero Sell ratings.

The Waiting Game for Non-Advertising Growth Catalysts Continues

The market holds Meta to a high standard, especially regarding growth, as its AI investments aim to provide additional tailwinds. At this point, it is becoming increasingly difficult for Meta to justify its AI spending based on advertising growth alone. The firm needs alternative catalysts to restore confidence among many investors.

The good news is that Meta is in the process of pulling additional growth levers, although many of these initiatives are in their early stages and have yet to produce meaningful results. These initiatives include the potential pathway for selling its excess compute to third parties experiencing strong demand for AI services.

Additionally, Meta is working to monetize its Muse Spark 1.1 model, which was released in July. This is the first time Meta will try to directly monetize a model through token sales. The company is expanding access to Muse Spark 1.1 through popular model distribution channels such as OpenRouter.

Lastly, Meta recently released subscription offerings that could drive meaningful growth if they gain significant adoption among Facebook and Instagram users.

There is still reason for optimism around Meta stock. However, investors should weigh the legal risks surrounding the company, as well as the possibility that its non-advertising growth may take substantial time to materialize.