Social media giant Meta is facing a landmark trial that could impact its future. Opening statements began on Tuesday in a US federal court case brought by 29 state attorneys general, who have accused Facebook and Instagram’s parent company of designing platforms to encourage infinite scrolling and keep their youngest users hooked, despite allegedly knowing they could fuel addictive behaviour. The company is also accused of collecting data on minors.
The case is expected to last as long as six weeks. If the attorneys general get their way, the Silicon Valley-based tech company might have to make structural changes to its platform and pay as much as $1.4 trillion in fines. While Meta denies the allegations, the potential consequences of this case could be significant for the company, which is already facing low employee morale, waves of layoffs and a series of lagging investments.
The potential exposure to Meta is significant. State penalties could reach as high as $1.4 trillion, Meta has said, although that is unlikely, as the coalition of states said it is seeking $200bn in damages. To put that in context, the amount is roughly the equivalent of Meta’s revenue last year.
In 2025, the tech giant generated nearly $201bn in revenue, and it had $83.2bn in operating income. The $200bn ask is significantly higher than any penalty the company has had to face so far. In March, a jury in a separate New Mexico lawsuit ordered Meta to pay $375m in civil penalties, and another $567m was ordered by a judge earlier this month.
At the time of the March penalty, financial services firm Morningstar said it was not overly concerned about the impact of the looming court cases on Meta’s valuation, even if governments around the world use these cases as a reason to push for structural changes to the business. While no one can predict which way the coalition case will go, Meta’s problems extend to concerns about significant financial exposure in some of its investments and business units. For instance, Reality Labs, the division responsible for Meta’s virtual and augmented reality tools and software like the metaverse, has lost $70bn since 2020.
Meta has also ramped up spending to build out AI infrastructure as growing concerns about an AI bubble loom over the sector. Cash flow for the business fell significantly, from $12bn in the first quarter to $784m in the second quarter, although it did not go into negative territory as some analysts had expected. The AI development seems to have stalled, and the virtual reality thing seems to be dead on arrival, at least for now.
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