Meta’s July Rally Defies EU Crackdown and Legal Woes Ahead of Q2 Earnings
Published on 07/16/2026 at 17:16 | Redaktion boerse-global.de
Meta Platforms is heading into its second-quarter earnings report on July 29 with a starkly contrasting narrative. On one hand, the stock has staged a furious comeback, climbing 17% in July to become the third-best performer in the S&P 500. On the other, the company faces an escalating regulatory assault from Brussels and a fresh class-action lawsuit in the United States.
The European Commission has taken the rare step of issuing preliminary findings that Facebook and Instagram violate the Digital Services Act through what it calls “addictive design.” At issue are features such as infinite scroll, autoplay videos, and algorithm-driven personalized recommendations. Brussels wants Meta to disable these defaults entirely. Non-compliance carries a penalty of up to 6% of global annual revenue — a sum that could reach into the tens of billions for a company of Meta’s scale. Meta spokesman Ben Walters has pushed back, pointing to existing safeguards like the “Teen Accounts” introduced for younger users. A quick resolution appears unlikely.
Meanwhile, the stock has been on a tear since early July. The turnaround began on July 1, when Bloomberg reported that Meta was developing its own cloud-computing business. Shares surged 8.8% that day. A week later, CEO Mark Zuckerberg stoked further enthusiasm by revealing that the company is considering renting out excess AI computing capacity to external clients, after internal demand for processing power proved well below supply.
Fund managers see a deeper story. “When a deeply undervalued stock like Meta catches a catalyst, it can behave like a coiled spring,” said John Belton, portfolio manager at Gabelli Funds. Indeed, Meta had fallen to 16 times forward earnings in early 2025, well below its 10-year average of over 20. Angelo Zino, head of technology at CFRA, argues that the re-rating reflects more than just momentum: “Very few companies have monetized AI within their core business better than Meta,” he said.
Should investors sell immediately? Or is it worth buying Meta?
The rally marks a sharp reversal from the drubbing Meta suffered in June, when shares lost 11% and ranked among the worst S&P 500 performers. The sell-off was triggered by Meta’s late-April earnings report, which raised its 2026 capital expenditure forecast to between $125 billion and $145 billion, largely to fund AI infrastructure. The following day, the company issued $25 billion in bonds to finance those investments. Wall Street questioned whether the massive capital outlay would ever pay off.
Since then, sentiment has turned. Analysts point to concrete products emerging from Meta’s infrastructure buildout — such as the $50 billion-plus Hyperion data center expansion in Louisiana — rather than mere promises. JPMorgan’s Doug Anmuth calls Meta a “show me” story, noting that the next quarterly reports will be critical in proving that higher spending translates into revenue growth.
On Thursday, Meta shares traded at EUR 593.10, a 0.15% dip from the prior day, but still 13.47% above their 50-day moving average of EUR 522.67. The 14-day RSI stands at 67.7, approaching overbought territory. The stock remains 12.50% below its all-time high of EUR 677.80 set in July 2025. Monthly volatility is running at 49.86% annualized, underscoring the wild swings of recent weeks.
Meta at a turning point? This analysis reveals what investors need to know now.
Adding to Meta’s legal burden, a federal judge in San Francisco ruled on July 15 that a class-action lawsuit over hacked Facebook accounts can proceed. Plaintiffs accuse Meta of failing to adequately protect user accounts and then denying victims access to their own data. The judge found sufficient grounds for breach of contract and unfair competition claims.
The July 29 earnings call will give investors their first real test of how these crosscurrents net out. Analysts expect revenue between $58 billion and $61 billion for the quarter. Yet the bigger question may be whether Brussels’ moves — and the threat of a multi-billion-euro fine — will begin to weigh on a stock that has so far shrugged off everything regulators and litigators have thrown at it.
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