Meta Platforms(META) - 2025 Q2 - Quarterly Report

Note About Forward-Looking Statements This report includes forward-looking statements subject to risks and uncertainties, with specific definitions for key terms - This report contains forward-looking statements based on current expectations and projections, which are subject to various risks, uncertainties, and assumptions detailed in the "Risk Factors" section[8] - The company does not undertake any obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law[9] - Key terms like "Meta," "company," "we," "us," and "our" refer to Meta Platforms, Inc and its subsidiaries, while "Family" refers to Facebook, Instagram, Messenger, and WhatsApp products[10] Limitations of Key Metrics and Other Data Key operational metrics are estimates based on complex internal methodologies and are subject to inherent inaccuracies and limitations - Family metrics (Daily Active People - DAP, Average Revenue Per Person - ARPP) are estimates based on internal company data and complex methodologies, which involve significant judgment and are susceptible to technical errors and inaccuracies[13][14] - The estimated potential error margin for worldwide DAP is approximately 3%, and actual numbers of unique people using products may vary significantly from these estimates[16] - As of Q4 2024, less than 3% of worldwide DAP consisted solely of "violating" accounts (bots and spam), an estimate based on internal review with limited visibility into encrypted products like WhatsApp[19] - Estimates for revenue, ad impressions, and average price per ad by user geography are affected by data limitations, as user location is based on factors like IP address and self-disclosed location, which may not always be accurate[20] PART I—FINANCIAL INFORMATION This part presents the company's unaudited financial statements and management's analysis of financial performance and condition Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets The balance sheets show an increase in total assets and stockholders' equity as of June 30, 2025 Condensed Consolidated Balance Sheets (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $73,613 | $100,045 | | Total assets | $294,744 | $276,054 | | Total current liabilities | $37,305 | $33,596 | | Total liabilities | $99,674 | $93,417 | | Total stockholders' equity | $195,070 | $182,637 | Condensed Consolidated Statements of Income The income statements reflect significant year-over-year growth in revenue, operating income, and net income Condensed Consolidated Statements of Income (in millions, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $47,516 | $39,071 | $89,830 | $75,527 | | Total costs and expenses | $27,075 | $24,224 | $51,833 | $46,862 | | Income from operations | $20,441 | $14,847 | $37,997 | $28,665 | | Net income | $18,337 | $13,465 | $34,981 | $25,834 | | Basic EPS | $7.28 | $5.31 | $13.87 | $10.17 | | Diluted EPS | $7.14 | $5.16 | $13.56 | $9.86 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income grew substantially, driven by net income and favorable foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $18,337 | $13,465 | $34,981 | $25,834 | | Change in foreign currency translation adjustment, net of tax | $1,866 | $(149) | $2,760 | $(694) | | Change in unrealized gain (loss) on available-for-sale investments and other, net of tax | $228 | $109 | $566 | $154 | | Comprehensive income | $20,431 | $13,425 | $38,307 | $25,294 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased due to strong net income, partially offset by significant share repurchases and dividends - Total stockholders' equity increased to $195,070 million as of June 30, 2025, from $182,637 million at December 31, 2024[31] - Net income for the six months ended June 30, 2025, was $34,981 million, contributing to retained earnings[31] - Share repurchases for the six months ended June 30, 2025, totaled $23,159 million, reducing retained earnings[31] - Dividends and dividend equivalents declared for the six months ended June 30, 2025, were $2,691 million[31] Condensed Consolidated Statements of Cash Flows Operating cash flow grew strongly, but heavy investing and financing activities led to a net decrease in cash reserves Condensed Consolidated Statements of Cash Flows (in millions) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $49,587 | $38,616 | | Net cash used in investing activities | $(45,968) | $(17,032) | | Net cash used in financing activities | $(35,472) | $(30,945) | | Net decrease in cash, cash equivalents, and restricted cash equivalents | $(31,610) | $(9,801) | | Cash, cash equivalents, and restricted cash equivalents at end of period | $13,828 | $33,026 | - Cash paid for income taxes, net, was $5,544 million for the six months ended June 30, 2025, a decrease from $6,559 million in the prior year[37] - Cash paid for interest, net, was $478 million for the six months ended June 30, 2025, an increase from $245 million in the prior year[37] Notes to Condensed Consolidated Financial Statements These notes provide supplemental details on accounting policies, revenue, financial instruments, and other key financial areas Note 1. Summary of Significant Accounting Policies The financial statements adhere to GAAP, with a notable change in the estimated useful lives of server and network assets - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC interim financial reporting rules, with certain information and note disclosures condensed or omitted[39] - Effective January 1, 2025, the estimated useful lives of most servers and network assets were increased to 5.5 years, resulting in a $1.58 billion reduction in depreciation expense and a $1.34 billion increase in net income ($0.52 per diluted share) for the six months ended June 30, 2025[44] - There have been no material changes to the company's significant accounting policies from its Annual Report on Form 10-K for the year ended December 31, 2024[45] Note 2. Revenue Revenue growth was driven by advertising across all geographic regions, with Family of Apps as the primary contributor Revenue by Source and Segment (in millions) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Advertising | $46,563 | $38,329 | $87,955 | $73,965 | | Other revenue | $583 | $389 | $1,093 | $769 | | Family of Apps | $47,146 | $38,718 | $89,048 | $74,734 | | Reality Labs | $370 | $353 | $782 | $793 | | Total revenue | $47,516 | $39,071 | $89,830 | $75,527 | Revenue by Geography (in millions) | Region | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | United States and Canada | $18,454 | $14,640 | $35,323 | $28,287 | | Europe | $11,128 | $9,153 | $20,749 | $17,557 | | Asia-Pacific | $12,858 | $10,967 | $24,097 | $21,279 | | Rest of World | $5,076 | $4,311 | $9,661 | $8,404 | | Total revenue | $47,516 | $39,071 | $89,830 | $75,527 | - Total deferred revenue was $876 million as of June 30, 2025, with most expected to be realized within one year[47] Note 3. Earnings per Share Both basic and diluted earnings per share showed significant year-over-year increases for the three and six-month periods Earnings Per Share (EPS) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $7.28 | $5.31 | $13.87 | $10.17 | | Diluted EPS | $7.14 | $5.16 | $13.56 | $9.86 | - Approximately 1 million shares of Class A common stock equivalent of restricted stock units (RSUs) were excluded from the diluted EPS calculation for the three months ended June 30, 2025, due to their anti-dilutive effect, a significant decrease from 33 million shares in the prior year[50] Note 4. Financial Instruments The company holds a diverse portfolio of financial instruments, primarily in cash equivalents and marketable securities Fair Value Measurement at June 30, 2025 (in millions) | Description | Total Fair Value | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Cash equivalents | $7,261 | $7,010 | $251 | $— | | Marketable securities | $35,066 | $21,212 | $13,854 | $— | | Restricted cash equivalents | $1,704 | $1,704 | $— | $— | | Other assets | $105 | $— | $— | $105 | | Total | $44,136 | $29,926 | $14,105 | $105 | Marketable Debt Securities with Unrealized Losses at June 30, 2025 (in millions) | Security Type | Fair Value | Unrealized Losses | | :--- | :--- | :--- | | U.S. government securities | $3,975 | $(61) | | U.S. government agency securities | $751 | $(5) | | Corporate debt securities | $3,629 | $(64) | | Total | $8,355 | $(130) | - Unrealized losses on marketable equity securities were $511 million for the three months ended June 30, 2025, and $374 million for the six months ended June 30, 2025, recorded within interest and other income, net[57] Marketable Debt Securities by Contractual Maturities at June 30, 2025 (in millions) | Maturity | Amount | | :--- | :--- | | Due within one year | $3,388 | | Due after one year to five years | $26,817 | | Total | $30,205 | Note 5. Non-Marketable Equity Investments Non-marketable equity investments increased substantially due to a significant investment in Scale AI Non-Marketable Equity Investments (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Carrying value (measurement alternative) | $19,966 | $6,018 | | Non-marketable equity investments (equity method) | $2,022 | $52 | | Total non-marketable equity investments | $21,988 | $6,070 | - In June 2025, Meta completed a $13.79 billion investment in Scale AI, accounted for under the measurement alternative method[59] - As of June 30, 2025, the maximum exposure to loss in unconsolidated variable interest entities (VIEs) was $1.98 billion, with tender offers of up to $3.0 billion extended subsequent to the period end[60] Note 6. Property and Equipment The net value of property and equipment grew significantly, reflecting continued investment in infrastructure Property and Equipment, Net (in millions) | Asset Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Property and equipment, gross | $197,327 | $164,663 | | Less: Accumulated depreciation | $(50,288) | $(43,317) | | Property and equipment, net | $147,039 | $121,346 | - Depreciation expense on property and equipment was $8.12 billion for the six months ended June 30, 2025, an increase from $6.92 billion in the same period of 2024[63] - As of June 30, 2025, $3.26 billion of data center assets (construction in progress and land) were reclassified as held-for-sale, with no loss recognized upon reclassification[64] Note 7. Long-term Debt The company maintains a substantial long-term debt position consisting of fixed-rate senior unsecured notes - The carrying amount of long-term debt (fixed-rate senior unsecured notes) was $28.83 billion as of June 30, 2025, with an estimated fair value of $28.21 billion[65] Note 8. Commitments and Contingencies The company faces substantial financial commitments from leases and contracts, alongside significant ongoing legal and regulatory proceedings - Uncommenced operating and finance lease obligations total approximately $52.56 billion, primarily for data centers and network infrastructure, set to commence between 2025 and 2034[66] - Non-cancelable contractual commitments amounted to $27.95 billion as of June 30, 2025, with $18.30 billion due in 2025, mainly for servers, network infrastructure, and Reality Labs consumer hardware[67] - The settlement agreement for the In re Facebook, Inc, Consumer Privacy User Profile Litigation, involving a $725 million payment, became final in May 2025[73][220] - The FTC has initiated an administrative proceeding seeking substantial changes to Meta's modified consent order, including a prohibition on using minors' data for commercial purposes and limitations on new product launches, which Meta is challenging[75][221] - The European Commission issued a EUR €798 million fine in November 2024 for Meta's alleged infringement of EU competition rules related to Facebook Marketplace, which Meta appealed in January 2025[82][229] - The European Commission issued a EUR €200 million fine in April 2025, finding Meta's "subscription for no ads" model non-compliant with Digital Markets Act (DMA) requirements, which Meta appealed in July 2025[83][230] - A U.S District Court granted Meta's motion for summary judgment on fair use regarding the use of copyrighted books for generative AI model training in June 2025[90][240] Note 9. Stockholders' Equity The company actively returned capital to shareholders through significant share repurchases and increased quarterly dividends - As of June 30, 2025, $28.23 billion remained available and authorized for repurchases under the Class A common stock share repurchase program[94] - During the six months ended June 30, 2025, Meta repurchased 36 million shares of Class A common stock for an aggregate of $23.16 billion[94] Dividends Paid (in millions, except per share amounts) | Record Date | Payment Date | Dividend Per Share | Total | | :--- | :--- | :--- | :--- | | March 14, 2025 | March 26, 2025 | $0.525 | $1,325 | | June 16, 2025 | June 26, 2025 | $0.525 | $1,322 | | February 22, 2024 | March 26, 2024 | $0.50 | $1,273 | | June 14, 2024 | June 26, 2024 | $0.50 | $1,266 | - The quarterly cash dividend increased by 5% to $0.525 per share of outstanding Class A and Class B common stock, effective in the first quarter of 2025[95] - Total share-based compensation expense was $8.98 billion for the six months ended June 30, 2025, an increase from $8.18 billion in the same period of 2024[97] - As of June 30, 2025, unrecognized share-based compensation expense related to RSU awards was $46.75 billion, expected to be recognized over approximately three years[98] Note 10. Income Taxes The company manages significant unrecognized tax benefits and is impacted by recent court rulings and new tax legislation - Gross unrecognized tax benefits were $16.78 billion as of June 30, 2025, primarily related to research tax credits and transfer pricing with foreign subsidiaries[100] - A Tax Court opinion on May 22, 2025, valued intellectual property transferred to an international subsidiary at $7.79 billion, which is $1.48 billion higher than reported, leading to an increase in the provision for income taxes[103] - The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, is anticipated to reduce U.S federal cash tax payments for the remainder of 2025 and future years, with effects expected to be recognized in the period ending September 30, 2025[190] Note 11. Segment Information Family of Apps remains the highly profitable core, while Reality Labs continues to operate at a significant loss Segment Revenue, Expenses, and Income (Loss) from Operations (in millions) | Segment | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Family of Apps | Revenue | $47,146 | $38,718 | $89,048 | $74,734 | | | Income from operations | $24,971 | $19,335 | $46,736 | $36,999 | | Reality Labs | Revenue | $370 | $353 | $782 | $793 | | | Loss from operations | $(4,530) | $(4,488) | $(8,739) | $(8,334) | | Total | Revenue | $47,516 | $39,071 | $89,830 | $75,527 | | | Income from operations | $20,441 | $14,847 | $37,997 | $28,665 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, highlighting strong revenue growth, segment performance, and key operational trends Executive Overview of Second Quarter Results The second quarter of 2025 saw robust growth across key financial metrics, driven by increased advertising revenue Key Financial and Operational Highlights (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $47.52B | $39.07B | +22% | | Income from operations | $20.44B | $14.85B | +38% | | Net income | $18.34B | $13.47B | +36% | | Diluted EPS | $7.14 | $5.16 | +38% | | Ad impressions delivered (YoY) | +11% | N/A | N/A | | Average price per ad (YoY) | +9% | N/A | N/A | | Family daily active people (DAP) (YoY) | +6% (3.48B) | N/A | N/A | | Headcount (YoY) | +7% (75,945) | N/A | N/A | - The increase in income from operations was driven by advertising revenue growth, partially offset by higher infrastructure costs and employee compensation, but benefited from lower legal-related costs[115] Consolidated and Segment Results Family of Apps drove significant revenue and profit growth, while Reality Labs posted a modest revenue increase and a slightly larger operating loss Segment Performance (3 Months Ended June 30, in millions) | Segment | Revenue 2025 | Revenue 2024 | % Change | Op. Income (Loss) 2025 | Op. Income (Loss) 2024 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Family of Apps | $47,146 | $38,718 | 22% | $24,971 | $19,335 | 29% | | Reality Labs | $370 | $353 | 5% | $(4,530) | $(4,488) | (1)% | | Total | $47,516 | $39,071 | 22% | $20,441 | $14,847 | 38% | - The company reports financial results for two segments: Family of Apps (FoA), including Facebook, Instagram, Messenger, and WhatsApp; and Reality Labs (RL), covering virtual, augmented, and mixed reality consumer hardware, software, and content[117] Family of Apps Metrics Advertising revenue faces headwinds from regulatory changes and platform policies, countered by investments in AI and privacy-enhancing technologies - Advertising revenue is negatively impacted by reduced marketer spending due to limitations on ad targeting and measurement tools, stemming from regulatory changes (GDPR, DMA, CCPA) and third-party mobile operating systems (Apple, Google)[119][120][122] - Meta is investing significantly in artificial intelligence (AI), including generative AI, to enhance ad delivery, targeting, and measurement capabilities, and developing privacy-enhancing technologies[123] - Competitive products and services (e.g., TikTok) and macroeconomic conditions (inflation, high interest rates, market uncertainty) have pressured user engagement and advertising budgets[126][127] - Reels usage is growing but monetizes at a lower rate than Feed and Stories products, a trend expected to continue for the foreseeable future[127] Investment Philosophy The company is making substantial long-term investments in AI and Reality Labs, which are expected to increase operating losses in the near term - For the six months ended June 30, 2025, 82% of total costs and expenses were recognized in Family of Apps (FoA) and 18% in Reality Labs (RL)[129] - Significant investments in AI initiatives, including generative AI and superintelligence, are expected to require increased investment in infrastructure and headcount[129] - Reality Labs investments, focused on metaverse and wearables, are long-term, cutting-edge research and development, which reduced overall operating profit by approximately $8.74 billion in the first half of 2025, with full-year RL operating losses expected to increase in 2025[130] Trends in Our Revenue by User Geography Revenue growth was strong across all geographic regions, led by Europe and Rest of World Revenue Growth by User Geography (Q2 2025 vs Q2 2024) | Region | Revenue Growth | | :--- | :--- | | United States & Canada | +21% | | Europe | +24% | | Asia-Pacific | +19% | | Rest of World | +24% | - Revenue in regions like the United States & Canada and Europe is relatively higher due to the size and maturity of their online and mobile advertising markets, while ad impression growth is mainly in lower-monetizing geographies such as Asia-Pacific[132] Trends in Our Family Metrics Both daily active people and average revenue per person continued to show healthy year-over-year growth - Worldwide Daily Active People (DAP) increased 6% year-over-year to 3.48 billion on average during June 2025[140] - Worldwide Average Revenue Per Person (ARPP) was $13.65 in the second quarter of 2025, an increase of 15% from the second quarter of 2024[145] - DAP calculations rely on complex techniques, algorithms, and machine learning models to estimate unique people, with an estimated error margin of approximately 3%[137][139] Trends in Our Ad Impressions and Average Price Per Ad Growth in both ad impressions delivered and average price per ad contributed to the strong advertising revenue performance - Ad impressions delivered across Family of Apps increased by 11% year-over-year in Q2 2025 and 8% for the six months ended June 30, 2025, with growth observed across all regions, particularly Asia-Pacific[166] - The average price per ad increased by 9% year-over-year in Q2 2025 and 10% for the six months ended June 30, 2025, driven by increased advertising demand and ongoing improvements to ad performance[166] - The increase in average price per ad was partially offset by a higher number of ad impressions delivered, especially in geographies and products like Reels that monetize at lower rates[166] Components of Results of Operations The company's financial results are driven by advertising revenue and managed through key expense categories like infrastructure, R&D, and G&A - Advertising revenue is primarily generated from displaying ads on Facebook, Instagram, Messenger, and third-party mobile applications, based on impressions delivered or user actions[154][155] - Other revenue includes paid messaging from WhatsApp, Meta Verified subscriptions, net fees from developers using Payments infrastructure, and various other sources[156] - Reality Labs (RL) revenue is derived from consumer hardware products (e.g., Meta Quest, Ray-Ban Meta AI glasses) and related software and content[157] - Cost of revenue encompasses expenses related to data center operations, technical infrastructure (depreciation, employee compensation, energy, bandwidth), partner arrangements, RL inventory costs, and content costs[158] - Research and development expenses primarily consist of employee compensation for engineering and technical teams, RL technology development costs, infrastructure costs, and facilities-related costs[159] - General and administrative expenses include employee compensation for executives and administrative staff, legal-related costs (fines, settlements), other taxes (digital services taxes), and professional services[161] Results of Operations Financial results show strong revenue growth and improved operating margins, driven by higher ad revenue and lower legal costs Condensed Consolidated Statements of Income Data (in millions, except percentages) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $47,516 | $39,071 | $89,830 | $75,527 | | Cost of revenue | $8,491 (18%) | $7,308 (19%) | $16,063 (18%) | $13,948 (18%) | | Research and development | $12,942 (27%) | $10,537 (27%) | $25,092 (28%) | $20,515 (27%) | | Marketing and sales | $2,979 (6%) | $2,721 (7%) | $5,735 (6%) | $5,285 (7%) | | General and administrative | $2,663 (6%) | $3,658 (9%) | $4,943 (6%) | $7,114 (9%) | | Total costs and expenses | $27,075 (57%) | $24,224 (62%) | $51,833 (58%) | $46,862 (62%) | | Income from operations | $20,441 (43%) | $14,847 (38%) | $37,997 (42%) | $28,665 (38%) | | Net income | $18,337 (39%) | $13,465 (34%) | $34,981 (39%) | $25,834 (34%) | - Family of Apps (FoA) revenue increased by 22% for the three months and 19% for the six months ended June 30, 2025, primarily driven by advertising revenue[165] - Reality Labs (RL) revenue increased by 5% for the three months but decreased by 1% for the six months ended June 30, 2025, driven by increased sales of Ray-Ban Meta AI glasses, partially offset by a net decrease in Meta Quest sales[168] - Foreign exchange rate changes had an unfavorable impact on revenue, reducing total revenue by $82 million for the three months and $1.32 billion for the six months ended June 30, 2025[169][170] - Cost of revenue increased by 16% for the three months and 15% for the six months ended June 30, 2025, mainly due to higher operational expenses for data centers and technical infrastructure, partially offset by a lower depreciation growth rate from extended asset useful lives[171] - Research and development expenses increased by 23% for the three months and 22% for the six months ended June 30, 2025, primarily due to higher employee compensation (10% headcount growth in engineering) and infrastructure costs[173][174] - General and administrative expenses decreased by 27% for the three months and 31% for the six months ended June 30, 2025, mainly driven by lower legal-related costs[176] - Interest and other income, net, decreased by 64% for the three months but increased by 47% for the six months ended June 30, 2025, with the quarterly decrease driven by unrealized losses on marketable equity securities[183][184] - Provision for income taxes increased by 34% for the three months and 14% for the six months ended June 30, 2025, due to increases in income before taxes; the effective tax rate decreased in the six-month period due to excess tax benefits from share-based compensation[186][187] Liquidity and Capital Resources The company maintains a strong liquidity position despite significant capital expenditures, investments, and returns to shareholders - Cash, cash equivalents, and marketable securities totaled $47.07 billion as of June 30, 2025, a decrease of $30.74 billion from December 31, 2024[194] - The decrease in cash was primarily due to $30.70 billion in capital expenditures, $25.58 billion in capital returns (share repurchases and dividends), $15.21 billion in non-marketable equity investments, and $8.99 billion in taxes paid for RSU settlements, partially offset by $49.59 billion in cash generated from operations[194] - The company anticipates making capital expenditures of approximately $66 billion to $72 billion in 2025 to support its core business and AI efforts[198] - Available funds and cash flow from operations and financing activities are expected to be sufficient to meet operational cash needs, infrastructure and AI investments, share repurchases, and dividend payments for the foreseeable future[200] - Uncommenced lease obligations amount to approximately $52.56 billion, and non-cancelable contractual commitments total $27.95 billion as of June 30, 2025[201][202] - Long-term debt outstanding is $29.0 billion, with future interest payment obligations of $1.38 billion (short-term) and $27.41 billion (long-term)[203] - As of June 30, 2025, $28.23 billion remained available and authorized for share repurchases[204] - Cash paid for income taxes was $5.54 billion during the six months ended June 30, 2025; long-term income tax liabilities include $12.05 billion related to uncertain tax positions[206] Critical Accounting Estimates There have been no material changes to the company's critical accounting estimates since the last annual report - There have been no material changes to the company's critical accounting estimates since its Annual Report on Form 10-K for the year ended December 31, 2024[209] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk profile has increased due to additional investments in marketable and non-marketable equity securities - Additional investments in marketable equity securities and non-marketable equity investments in the second quarter of 2025 could have a material impact on the fair value or carrying value of holdings[210] - Except for the described equity price risk, there have been no material changes to market risk exposures during the six months ended June 30, 2025[211] Item 4. Controls and Procedures Management has concluded that the company's disclosure controls and internal financial reporting controls are effective - The CEO and CFO concluded that the company's disclosure controls and procedures were designed at a reasonable assurance level and were effective as of June 30, 2025[212] - No changes in internal control over financial reporting were identified during the period that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[213] - Management acknowledges that any controls and procedures, regardless of design, can provide only reasonable assurance of achieving desired control objectives due to inherent limitations and resource constraints[214] PART II—OTHER INFORMATION This part provides details on legal proceedings, risk factors, share repurchases, and other required disclosures Item 1. Legal Proceedings The company is subject to numerous significant legal and regulatory proceedings globally concerning privacy, competition, and other matters Privacy and Related Matters The company faces ongoing legal challenges and regulatory actions related to its data privacy practices and user data transfers - The settlement agreement for the In re Facebook, Inc, Consumer Privacy User Profile Litigation, involving a $725 million payment, became final in May 2025[220] - The FTC has initiated an administrative proceeding seeking substantial changes to Meta's modified consent order, including a prohibition on using minors' data for commercial purposes and significant limitations on new product launches, which Meta is challenging[221] - The Irish Data Protection Commission (IDPC) issued a EUR €1.2 billion administrative fine and corrective orders in May 2023 for non-compliance with GDPR regarding transfers of European Economic Area (EEA) Facebook user data, which Meta is appealing[225] - Multiple putative class actions are ongoing, alleging improper receipt of individuals' information from third-party websites or apps via Meta's business tools[226] Competition The company is defending against major antitrust lawsuits and appealing significant fines from European competition authorities - The FTC's antitrust lawsuit against Meta, alleging anticompetitive conduct related to Instagram and WhatsApp acquisitions, concluded trial in May 2025, with a decision expected in the second half of 2025 or later[228] - The European Commission issued a EUR €798 million fine in November 2024, finding Meta infringed EU competition rules related to Facebook Marketplace, which Meta appealed in January 2025[229] - The European Commission issued a EUR €200 million fine in April 2025, determining Meta's "subscription for no ads" model did not comply with Digital Markets Act (DMA) requirements, which Meta appealed in July 2025[230] Securities and Other Actions The company is involved in ongoing securities class actions and government investigations related to data practices and disclosures - Ongoing securities class actions and derivative actions relate to platform and user data practices, alleged misuse of data, and disclosures of earnings results for Q2 2018 and Q4 2021[232][235] - The U.S Court of Appeals for the Ninth Circuit returned a securities case to the district court in January 2025, where plaintiffs filed a fourth amended complaint in July 2025[233] - Government investigations and requests are ongoing regarding a former employee's allegations and internal company documents concerning algorithms, advertising, user metrics, and content enforcement practices[234] Youth-Related Actions Numerous lawsuits and regulatory proceedings allege that the company's platforms cause harm to young users - Numerous lawsuits, including putative class actions and public nuisance claims, allege that Facebook and Instagram cause "social media addiction" and mental health harms in users, particularly those under 18[236] - U.S federal cases were centralized in October 2022, with the first group of personal injury cases set for trial in November 2025 and state attorneys general cases scheduled for 2026[236] - The European Commission opened formal proceedings in May 2024 to assess Instagram and Facebook's compliance with Digital Services Act (DSA) requirements regarding systemic risks to minors and other vulnerable users[237] Other Actions The company is engaged in various other legal actions, including class actions on ad metrics and regulatory inquiries into AI and financial advertising - Class actions alleging Meta inflated ad audience size estimates, resulting in artificially increased demand and higher prices, are scheduled for trial in October 2025[239] - A U.S District Court granted Meta's motion for summary judgment on fair use regarding the use of copyrighted books for generative AI model training in June 2025[240] - The European Commission opened formal proceedings in April 2024 to assess Facebook and Instagram's compliance with various Digital Services Act (DSA) requirements, including those related to elections, content reporting, and deceptive advertising[242] - The Consumer Financial Protection Bureau (CFPB) initiated a NORA process in September 2024 regarding an investigation into advertising for financial products and services on Meta's platform[243] Item 1A. Risk Factors This section outlines significant risks affecting the company's products, operations, regulations, data security, and stock ownership Risks Related to Our Product Offerings The company faces risks from user retention, marketer spending, regulatory impacts on advertising, and the uncertain success of new product investments - Failure to retain existing users or add new users, or a decrease in user engagement, particularly for Facebook and Instagram, could significantly harm revenue and financial results[254] - The loss of marketers or a reduction in their spending, driven by factors like ineffective ad delivery, regulatory changes, or third-party platform policies, could seriously harm the advertising-dependent business[260][261][262] - Changes to the regulatory environment, third-party mobile operating systems (e.g., Apple's iOS changes), and browsers (e.g., Google's phasing out of third-party cookies) have impacted and will continue to impact the availability of data signals for ad targeting and measurement, adversely affecting advertising revenue[265][266][267] - New products and changes to existing products, especially in consumer hardware and virtual/augmented/mixed reality technology, or significant investments in AI initiatives, could fail to attract or retain users or generate sufficient revenue and profits[270][272][273] - The Reality Labs strategy and investments in the metaverse and wearables are complex, evolving, and long-term initiatives with uncertain market acceptance, potentially diverting resources and adversely affecting financial results[280] - Inability to maintain and enhance brands due to unfavorable media coverage, negative publicity (e.g., privacy practices, content issues, user well-being), or enforcement actions could impair the user, marketer, and developer base[281][283] Risks Related to Our Business Operations and Financial Results Operational risks include intense competition, financial volatility, high expenses, infrastructure dependency, litigation, and international complexities - The business operates in a highly competitive landscape across social networking, digital advertising, and AR/VR, facing competitors with potentially greater resources or more effective strategies, which could lead to declines in user engagement and harm financial results[287][289] - Quarterly financial results are volatile and difficult to predict due to numerous factors, including user base and engagement, marketer spending fluctuations, ad pricing, product changes, and macroeconomic/geopolitical conditions[293][295][296][300] - Significant operating expenses and investments, particularly in AI initiatives and Reality Labs, reduce operating margin and profitability, with Reality Labs operating losses expected to increase in 2025[302][303] - Dependence on technical infrastructure means any significant disruption (e.g., outages, natural disasters, cyber-attacks) could damage reputation, result in user loss, and adversely affect financial results[304] - Real or perceived inaccuracies in community and other metrics (DAP, ARPP) due to complex methodologies, technical errors, or data limitations could harm reputation and negatively affect business by reducing marketer allocation[309][316] - Significant international operations expose the company to increased business, economic, and legal risks, including political instability, diverse regulatory scrutiny, currency fluctuations, and trade compliance challenges[318][319] - Design, manufacturing, and supply chain risks for consumer hardware products (e.g., quality issues, supply/labor shortages, geopolitical impacts) could adversely affect financial results[321][323] - Involvement in numerous class action lawsuits and other litigation matters is expensive and time-consuming, with potential for substantial monetary damages, fines, or undesirable changes to business practices[326][327] - Acquisitions and other strategic transactions carry risks of integration difficulties, substantial costs, debt incurrence, equity dilution, and failure to realize expected synergies[329][331][332] - Exposure to greater than anticipated tax liabilities due to complex and evolving tax laws, interpretations, and audits (e.g., IRS transfer pricing dispute) could harm financial position and results of operations[333][334] - The loss of key personnel, particularly Mark Zuckerberg, or failure to attract and retain other highly qualified personnel, could disrupt operations and adversely affect the business[342][343] Risks Related to Government Regulation and Enforcement The company is subject to extensive and evolving global regulations that could restrict access, impose penalties, and require significant business changes - Government actions that restrict access to products (e.g., Russia, China), censor content, or impair advertising ability in their countries could substantially harm business and financial results[348][351] - The business is subject to complex and evolving U.S and foreign laws and regulations (e.g., privacy, data use, AI, competition, youth safety), with uncertain interpretation and enforcement, potentially leading to claims, changes to products, monetary penalties, or declines in user growth/engagement[352][353] - Ongoing regulatory and government investigations (e.g., FTC, IDPC, European Commission) could cause substantial costs, expose the company to civil/criminal liability or penalties, and require changes to business practices[364][365][366] - Compliance with the FTC consent order, GDPR, U.S state privacy laws, youth social media laws, ePrivacy Directive, DMA, DSA, and other regulatory requirements demands significant operational resources and business modifications, with non-compliance risking material adverse effects on business, reputation, and financial results[367][370] - Liability risks from information/content published on products (e.g., defamation, misinformation, IP infringement, youth harms) and evolving legislation (e.g., European Copyright Directive, DSA, Brazilian intermediary liability) may require product changes, increase costs, or result in fines/service restrictions[371][372][373] - Payment-related activities subject the company to additional regulatory requirements (e.g., anti-money laundering, consumer protection, virtual currency) and risks like fraud, increasing costs and potential penalties[376][377] Risks Related to Data, Security, Platform Integrity, and Intellectual Property The company faces significant risks from security breaches, platform misuse, technical vulnerabilities, and intellectual property disputes - Security breaches, improper access to or disclosure of company or user data, hacking, and other cyber incidents are prevalent risks that could harm reputation, diminish competitive position, and result in financial harm[379][380][382] - Intentional misuse of services and user data by third parties, or other undesirable/illicit activity on the platform, could adversely affect user trust, reputation, and financial results[384][386] - Errors, bugs, or vulnerabilities in highly technical software/hardware systems, or failures to address technical limitations, could negatively impact user experience, product performance, and data protection[387] - Inability to protect intellectual property (patents, trademarks, copyrights, trade secrets) could diminish brand value, allow competitors to mimic products, and adversely affect the business[388][389] - Ongoing intellectual property lawsuits, including those related to AI training data and outputs, are expensive and time-consuming, with potential for significant damages or required changes to operations[390][391] Risks Related to Ownership of Our Class A Common Stock Ownership of Class A common stock involves risks of price volatility and limited influence due to a dual-class structure - The trading price of Class A common stock has been and will likely remain volatile due to various factors including financial results, analyst actions, market sentiment, and litigation[393][395] - The dual-class stock structure concentrates voting control with the CEO and certain Class B common stock holders, limiting other stockholders' ability to influence corporate matters[396] - The company's status as a "controlled company" under Nasdaq rules could make Class A common stock less attractive to some investors or otherwise harm its stock price[398] - Delaware law and provisions in the certificate of incorporation and bylaws could make a merger, tender offer, or proxy contest difficult, potentially depressing the trading price of Class A common stock[399][402] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity for the second quarter of 2025 - There were no unregistered sales of equity securities during the period[403] Issuer Purchases of Equity Securities (3 Months Ended June 30, 2025) | Period | Total Shares Purchased (in thousands) | Average Price Paid per Share | Total Shares Purchased as Part of Publicly Announced Programs (in thousands) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (in millions) | | :--- | :--- | :--- | :--- | :--- | | April 1 - 30, 2025 | 9,103 | $526.85 | 9,103 | $33,151 | | May 1 - 31, 2025 | 3,718 | $630.76 | 3,718 | $30,807 | | June 1 - 30, 2025 | 3,698 | $697.80 | 3,698 | $28,226 | | Total | 16,519 | N/A | 16,519 | N/A | - The share repurchase program, authorized in January 2017, does not have an expiration date, with $28.23 billion remaining available as of June 30, 2025[406] Item 5. Other Information This section discloses a Rule 10b5-1 trading plan adopted by the Chief Product Officer - Christopher K Cox, Chief Product Officer, entered into a Rule 10b5-1 trading plan on May 5, 2025, for the sale of up to 75,000 shares of Class A common stock, with the plan terminating on July 31, 2026[405] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including incentive plans, policies, and required certifications - Exhibits include the 2025 Equity Incentive Plan, forms of award agreements, Director Compensation Policy, and certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act[407] - Various Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbase Documents, and Cover Page Interactive Data File) are filed[407] SIGNATURES The report is formally authorized and signed by the Chief Financial Officer and Chief Accounting Officer - The Quarterly Report on Form 10-Q was signed on July 30, 2025, by Susan Li, Chief Financial Officer, and Aaron Anderson, Chief Accounting Officer[411]