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The author explicitly states they are not taking a directional position, framing the situation as a binary event with multiple possibilities rather than an investment thesis.
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Meta will report it's Q2 earnings after the close in the coming Wednesday, July 29, and the stock has already fallen about 2.5% while we head into it. The exact same pattern happened last quarter, Meta grew revenue 33%, (fastest since 2021) and the stock still dropped more than 6-7% after hours. The reason wasn't the results. It was Meta lifting its 2026 capex guidance toward $145 billion, nearly double the prior year.
The advertising business is a foregone conclusion, estimate sits at $60.18 billion revenue and $7.18 EPS, management's own guidance range is $58-61 billion. Deutsche Bank raised its forecast this week citing that Meta's AI-powered ad tools are driving stronger advertiser ROI and conversion performance. The attention is on two things, first, what capex guidance comes next and whether margin compression that started showing up last quarter continues. Operating margin was around 41% last quarter, down from a 48% peak in Q4 2024.
One analyst prediction suggests that Zuckerberg could announce a significant AI compute capacity-leasing deal with a frontier lab like Anthropic or OpenAI on the call, following the same sell your excess AI infrastructure playbook we have seen a few weeks ago with Meta's cloud pivot. That would change the whole angle of the capex concerns, spending that funds a new leasable revenue stream is completely differently than spending that's purely internal cost.
The bear case is, Meta trades at a real premium to peers on nearly every lens, forward P/E about 1.7x the sector median, EV/Sales around 2.75x, meaning the market is pricing Meta as an AI infrastructure growth stock now, not as an advertising platform. That's exactly why capex guidance keeps moving the stock more than the actual earning performance does. And EPS growth of 1.46% yoy is the softest in its group, the premium here is being paid for scale and AI optionality, not for being cheap or fast-growing on current numbers.
There's also an important event, a social media addiction trial reportedly happening in August. This is an entirely separate legal risk sitting on top of everything.
So moving into Wednesday, there are two possibilities. Either Zuckerberg announces something like a compute-leasing deal or the ad business is strong enough on its own and the stock will be rewarded. Or the market ignores good numbers (like last quarter) again and keeps punishing the spending plan no matter how strong advertising looks.