The Key Takeaways From Meta's Earnings and Lackluster Forecast

Wedbush analyst Ygal Arounian discusses Meta's Q2 earnings, focusing on weak Q3 revenue guidance, large CapEx spending with unclear AI returns, and a sharp drop in free cash flow. He contrasts Meta's lack of non-ad revenue drivers with Alphabet's stronger cloud and TPU performance. Arounian sees Meta's AI investment returns still unproven, while acknowledging early-stage diversification efforts like AR glasses. - Meta Q2 ad business performed as expected but Q3 revenue guidance disappointed. - CapEx increased only at the low end, but free cash flow fell to $784M, raising sustainability concerns. - ROIC from AI spending is mostly limited to the ad business; other ventures remain too early. - Investors are struggling to see a bridge from AI investments to diversified revenue. - Alphabet's print was stronger, with accelerating cloud business and TPU sales providing diversification. - Meta's AR glasses and Llama model are long-term AI distribution bets, but timing is uncertain. - Stock down ~6.2% in after-hours trading, mirroring earlier Alphabet reaction but with less visible AI upside.