Meta Earnings Preview: Can 33% Ad Growth Outrun a $145 Billion Capex Bill?

• Meta Platforms (NASDAQ: META) reports Q2 2026 earnings on Wednesday, July 29, after the market close, with a call at 4:30 p.m. ET.
• Analysts are forecasting EPS of roughly $7.18 to $7.23 on revenue between $60.2 billion and $60.3 billion, which would represent continued acceleration from the 33% year-over-year growth Meta posted last quarter.
• Meta shares closed Friday at $595.19, about 25% below the 52-week high of $796.25, even though the underlying ad business has kept accelerating rather than slowing down.
• The company raised its full-year 2026 capex guidance to a range of $125 billion to $145 billion in April, up from an earlier $115 billion to $135 billion, citing higher memory component costs and additional data center spending.
• Operating margin has already slipped to roughly 41%, down from a 48% peak in the fourth quarter of 2024, marking the first real evidence that AI spending is beginning to touch profitability rather than just fund future growth.

Meta Earnings Preview - July 2026

Meta has had an unusual year. The stock is down about 16.5% over the trailing twelve months and trades roughly 25% below its 52-week high, yet the core advertising business has never looked stronger. Revenue grew 33% year over year last quarter to $56.31 billion, beating the $55.5 billion Street estimate, an acceleration from the 22% growth Meta posted for all of 2025. Ad impressions across the family of apps climbed 19%, average price per ad rose 12%, and daily active people across the platform averaged 3.56 billion, up 4%. That is not the profile of a business losing ground. The markdown in Meta's stock has been entirely about the spending required to keep that engine running.

Wednesday's report will show whether that spending is starting to bite. Meta's own guidance calls for Q2 revenue between $58 billion and $61 billion, and the current consensus of roughly $60.2 billion to $60.3 billion sits toward the upper end of that range, suggesting analysts expect another solid quarter. The real focus, as it has been for several quarters now, is capital allocation and margins. The implied volatility structure in META is one of the higher expected moves for this week's Magnificent 7 companies that are reporting. META boasts an 8% implied move for the week against the notional value of the stock price, at a +-$48.96 range. Looking to September, we only see a +-$81.02 range which tells us that this week's earnings make up 62% of the implied range for the next few months.

Meta's Capex Guidance Keeps Climbing

Meta raised its full-year 2026 capex range to $125 billion to $145 billion back in April, an increase from the prior $115 billion to $135 billion range, and management attributed the increase to higher component pricing and additional data center costs tied to future capacity. The company spent nearly $20 billion in the first quarter of 2026 alone. Total expenses grew 35% year over year in that same quarter, already outpacing the 33% revenue growth rate, which is the kind of crossover investors watch closely for signs that spending is starting to outrun the business funding it. Wednesday's print will show whether that gap widened or narrowed in Q2, and any further upward revision to the full-year capex range would likely draw an outsized reaction regardless of how the headline EPS number lands.

Margins Are Quietly Being Squeezed

Operating margin came in at roughly 41% in the first quarter of 2026, down from the 48% peak Meta posted in the fourth quarter of 2024. That is the clearest sign yet that AI infrastructure spending is starting to show up in the income statement rather than remaining a purely balance-sheet story. Management's framing hasn't changed: AI is the growth engine, capex is the entry fee, and the ad business generates enough cash to absorb it. That story has largely held up so far, with Meta trading at a real premium to peers on both forward price-to-earnings, at roughly 1.7 times the group median, and enterprise value-to-sales, at about 2.75 times. This earnings print is where that premium gets tested again, since a market pricing Meta as an AI infrastructure growth stock rather than an ad platform will not forgive a growth miss.

Bullish Case for Meta Earnings

Bulls point to a business that keeps accelerating even as the stock price has fallen. Revenue growth of 33% last quarter was faster than the 22% Meta posted for all of 2025, and ad pricing power, up 12% per impression, suggests advertisers are seeing real returns from Meta's AI-driven targeting tools rather than simply absorbing rate hikes. At roughly 22 times earnings, the stock now trades below the S&P 500's approximate 28.5 multiple, a rare discount for a company still growing this quickly. Bank of America has a Buy rating and $835 price target, citing healthy ad growth and a margin tailwind from May headcount reductions, and expects Q3 revenue guidance in the $60.5 billion to $63.5 billion range, representing 18% to 24% year-over-year growth. If Meta can show margins stabilizing even with capex at the high end of its range, bulls argue the stock has room to reclaim ground lost this year.

Bearish Case for Meta Earnings

Bears are focused squarely on the spending trajectory. A capex range that has already been revised upward once this year, now sitting at $125 billion to $145 billion, leaves little room for comfort if Meta raises it again or signals that 2027 spending will step up further. Operating margin compression from 48% to 41% over roughly a year and a half is a meaningful move for a company of Meta's size, and Reality Labs continues to operate at a significant loss with no clear profitability timeline. Meta also faces ongoing regulatory and legal overhang, including youth safety-related trials with additional proceedings scheduled later in 2026 that management has flagged as carrying potential for material loss. With the stock already trading at a premium on most valuation metrics relative to peers like Alphabet, bears argue there is little cushion if Wednesday's quarter shows further margin erosion without a clear signal on when AI spending starts generating measurable returns.

Mike Butler, tastylive director of market intelligence, has been trading the markets for a decade. He appears on the tastylive morning show Monday - Friday. @tradermikeyb

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