Operating income at the social media giant drops 8% to $US18.8bn for the June quarter, even though underlying performance is stronger. Without the legal charge and severance costs, Meta’s operating income would have climbed 9%.
Litigation is now a core line item in Meta’s results. Legal risk is starting to rival product and advertising trends as a driver of investor sentiment.
Meta faces a sprawling list of cases, stretching from Australia to the US. In Australia, the platform is sued over scam advertisements that allegedly used a billionaire’s likeness, with victims losing their life savings.
In the US, Meta and Google’s YouTube lose a landmark case that finds them liable for social media addiction and harm linked to their services, a decision Meta plans to appeal. The Australian case is not reflected in Meta’s financial guidance, suggesting the legal overhang may be larger than it looks on paper.
Meta’s financial response is contained. The chief financial officer nudges up only the lower end of the company’s full-year expense forecast to cover the June-quarter legal hit.
Meta now expects total 2024 expenses between $US165bn and $US169bn. The guidance implies management is bracing for higher legal costs without resetting the company’s broader spending trajectory.
Regulatory and legal pressure around youth usage sits at the centre of Meta’s risk map. The company flags heightened scrutiny of youth-related issues across multiple markets and notes several trials in the US scheduled for this year.
Those cases focus on alleged harms to young users and could trigger a material loss, according to Meta’s own warning. The combination of addiction liability rulings and youth-focused litigation now challenges the core engagement model that powered Meta’s growth for more than a decade.
