Meta Platforms Falls 4% on Trial Risk With Costs Up 55%, Free Cash Flow Down to $784M
Meta stock fell 4% on Tuesday as a youth-harm trial opened in Oakland, with potential damages rivaling its entire market cap. Pinterest rose 3% and Snap gained 2%, indicating the selloff is company-specific rather than sector-wide. Meta's Q2 costs surged 55% against 28% revenue growth, reducing free cash flow to $784 million from $8.55 billion a year earlier.
Judge Yvonne Gonzalez Rogers is presiding over the case, which stems from a suit filed by 29 states in 2023, alleging Meta manipulated platform features to increase young users' engagement and violated the Children's Online Privacy Protection Act for allowing children under 13 without parental consent. Plaintiffs claim damages could reach $1.4 trillion, while Meta argues the claims are unsubstantiated and their demands disproportionate.
The trial may impact Meta's cost base, which grew 55% while revenue grew 28%, leading to a significant drop in free cash flow.
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