Two things happened to Mark Zuckerberg’s Meta (NASDAQ: META | META Price Prediction) yesterday. Earnings showed how much the company was investing in AI, and data centers particularly. This drove the stock down 10%. At the same time, it became clear that it had become the dominant social media presence in the world’s largest nation based on population. Daily active users of its Instagram platform are rising at a level that is hard to imagine. Meta should abandon the AI sector, where it is already a loser, for it, and one where it cannot catch up. It should focus on its core business, which is doing better than expected.
Meta’s top line growth rate remains impressive based on its size. In the quarter, revenue rose 28% to $60.8 billion, which keeps it on track to be one of the largest companies in America by that yardstick. Ad impressions were almost as strong and were up 14% year over year. These are the company’s revenue engine.
However, this did not translate into strong earnings. Net income fell 14% to $15.9 billion. Guidance was weak. “We expect third quarter 2026 total revenue to be in the range of $61-64 billion.” And the amount of money Meta plans to spend was nothing short of colossal. “We anticipate 2026 capital expenditures, including principal payments on finance leases, to be in the range of $130-145 billion, narrowed from our prior outlook of $125-145 billion.” Free cash flow nearly disappeared as it dropped 91%.
On the other side of the world, CNBC reports, “The number of daily active users on Instagram jumped 16% year-on-year to 531 million between July 18 and July 26, as per Sensor Tower data.” Its user base in the nation, which included Facebook, Instagram, and WhatsApp, dwarfs its competition. CNBC added, “WhatsApp had an average of 837 million daily active users in India, Instagram 501 million and Facebook 362 million so far this year.”
Somewhat lost in the analysis is that India’s population is 1.47 billion, which is 4.4 times that comparable number in the US. There is no sign that any other social media company comes close to its coverage, or ever will. Two analysts added that the ability of Meta to target people by way of its algorithms is extraordinary.
Big companies often get sidetracked because they believe they can grow by investing in projects that are not part of the core business. Examples of this range from Microsoft’s (NASDAQ: MSFT) video game products to Ford’s (NYSE: F) EVs. The decisions are often costly, and on reflection are staggering mistakes.
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