Meta shares fell sharply on Thursday after two US jury verdicts raised fresh legal pressure on the company’s social media business. Investors reacted to concerns that the rulings could lead to more lawsuits focused on platform design, not just user-generated content.
This legal path may place new attention on features tied to engagement, which remain central to Meta’s advertising model. Alphabet and Snap also moved lower as markets assessed the wider risk for social media companies.
A Los Angeles jury found Meta and Google liable in a case involving a young woman who said early exposure to Instagram and YouTube hurt her mental health. The jury awarded about $6 million in damages. Meta was assigned most of that amount, while Google was held responsible for the rest.
The case drew market attention because it focused on how social media products are built. Instead of centering on harmful posts alone, the lawsuit argued that core features, such as endless feeds and algorithm-led content delivery, encouraged compulsive use among minors. This approach may create a new path for future claims against major platforms.
A separate case in New Mexico added to those concerns. Jurors ordered Meta to pay $375 million after finding that the company misled users about child safety and failed to protect children from exploitation on its platforms. Together, the two rulings added another legal challenge for Meta as it continues to spend heavily on artificial intelligence.
Meta shares dropped about 7% after the verdicts, while Alphabet fell about 2.8%. Snap dropped even more sharply, losing 12.5%, as investors looked beyond the two cases and turned to the chance of broader litigation across the sector.
Experts said the verdicts may encourage more lawsuits that target platform design rather than user content. This distinction matters because technology companies have long relied on Section 230 protections in the United States. These protections generally shield online platforms from liability for content posted by users. However, design-based claims may try to move around this defense.
Adam Sarhan, CEO of 50 Park Investments, said, “These decisions don't break the business model today, but they raise the range of outcomes around future cash flows and margin structure.” He added that Meta investors were “repricing legal and regulatory risk after the recent verdicts.”
Ken Mahoney, CEO of Mahoney Asset Management, also warned about the financial side of prolonged cases. He said, “Financially, multiple verdicts could total billions of dollars in damages and legal costs, especially if courts hold the company liable for platform design rather than just user content.”
The latest rulings come while Meta and other social media firms already face a large number of lawsuits tied to youth mental health. More than 2,400 cases have been centralized before one judge in the California federal court. In addition, thousands more are grouped in the California state courts.
The Los Angeles case was known as K.G.M. v. Meta et al. It named Meta, Google, TikTok, and Snap. Snap and TikTok settled with the plaintiff before the trial began. Meta and Google, meanwhile, said they plan to appeal the verdict.
Investors are concerned that repeated court losses could force changes to features supporting user engagement and advertising growth. This issue arrives at a sensitive time for Meta, which is already committing tens of billions of dollars to AI. As a result, the company now faces both legal risk and investor questions over how future spending and platform rules may affect its core business.
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