Mumbai: Meta Platforms reported a strong second quarter for 2026, with advertising revenue increasing 27% year-on-year to $59.36 billion as artificial intelligence continued to improve campaign performance, targeting and user engagement across its platforms.
Advertising contributed an additional $12.8 billion compared with the same quarter last year. The company said the number of advertisements delivered increased 14%, while the average price per advertisement rose 12%, supported by stronger campaign performance, improving macroeconomic conditions and favourable currency movements.
Total revenue increased 28% to $60.8 billion, with the Family of Apps business contributing $60.37 billion.
Despite the strong revenue growth, profitability came under pressure as Meta significantly increased investment in artificial intelligence and infrastructure. Operating income declined 8% to $18.78 billion, while operating margin narrowed to 31% from 43% a year earlier.
Total costs and expenses rose 55% to $42.03 billion. The figure included $2.4 billion in legal charges and $1.18 billion in severance costs linked to the company’s workforce reduction announced in May.
Chief Financial Officer Susan Li said higher employee compensation, infrastructure investments, legal expenses and third-party AI token costs were the primary drivers of the increase. She added that excluding severance costs, employee expenses rose because of continued hiring of AI and engineering talent, while infrastructure spending reflected higher depreciation, data-centre operations and cloud services.
Meta said that without the legal and severance charges, operating income would have increased 9% instead of declining.
Research and development spending climbed 67% to $21.66 billion, underscoring the company’s aggressive investment in AI. Net income fell 14% to $15.85 billion, while diluted earnings per share declined 13% to $6.18.
AI delivers higher clicks and conversions
Meta said its latest AI models are improving both advertisement delivery and conversion rates across Facebook and Instagram.
During the quarter, the company introduced Meta Generative Recommender, which uses large language models to analyse advertising content and user preferences simultaneously rather than evaluating advertisements individually.
Early Instagram testing resulted in a 1% improvement in app-event conversions. On Facebook, updates to recommendation and ad-ranking models generated an 8.3% increase in advertisement clicks and a 15.7% rise in conversions.
Chief Executive Officer Mark Zuckerberg said Meta had expanded the contextual information used by its AI systems to determine advertisement relevance, helping improve campaign effectiveness across Facebook and Instagram.
The company’s Advantage+ advertising suite surpassed an annual revenue run rate of $75 billion during the quarter.
More than nine million small businesses now use at least one of Meta’s generative AI creative tools, while adoption of its AI image-generation capabilities more than doubled. Meta is also developing an end-to-end AI creative platform with agency integrations that will allow advertisers to create, analyse and optimise campaigns without leaving their existing workflows.
Threads and WhatsApp add advertising inventory
Meta completed the global rollout of advertisements on Threads during the quarter and expanded advertising placements and campaign objectives on WhatsApp Status ahead of a wider rollout.
User engagement also continued to grow. Time spent on Instagram increased at a double-digit rate, driven by improvements to Feed and Reels recommendations. Video viewing on Facebook rose 9% globally and by more than 10% in the US and Canada.
Daily active users across Meta’s family of applications averaged 3.6 billion in June, up 3% from a year earlier.
Reality Labs reported revenue of $431 million, up 16%, although its operating loss widened to $4.62 billion.
AI infrastructure spending accelerates
Capital expenditure reached $31.08 billion during the quarter as Meta continued investing in servers, data centres and networking infrastructure. The higher spending reduced free cash flow to $784 million from $8.55 billion a year earlier.
Zuckerberg said the company was expanding computing capacity to support AI across advertising, recommendation systems, business agents, APIs and enterprise services, adding that demand for compute continues to exceed supply.
Meta now expects capital expenditure of $130 billion to $145 billion in 2026, raising the lower end of its earlier guidance. The company also increased its full-year expense forecast to between $165 billion and $169 billion and projected third-quarter revenue of $61 billion to $64 billion.
