Meta's Teflon Shield: Why Scandals Can't Dent Its Booming Business

Mark Zuckerberg stood at Meta Connect last month and spoke about building as an act of love, hands in his pockets, voice almost wistful. He talked about pouring hearts and souls into products. Then he spent nearly an hour unveiling new AI tools—a chatbot called Muse, smart glasses, a wrist-worn AI device—without once mentioning Instagram or Facebook, the two platforms that transformed Meta into a $2 trillion company.

The omission was telling. For the past year, Meta has been drowning in legal trouble. Lawsuits have piled up across the country, with prosecutors and personal injury lawyers wielding internal emails, corporate documents, and whistleblower testimony to argue that Meta deliberately designed products to addict young users. A jury in New Mexico found the company a "public nuisance" akin to air pollution and fined it $942 million. A California court awarded $6 million to a 20-year-old woman who claimed Instagram damaged her mental health. In May, Meta paid $9 million to settle a Kentucky school district's case. Then came the headline settlement: $18 billion to 48 states, the District of Columbia, and three territories over child safety practices. The company denied wrongdoing in all cases and is appealing several verdicts. Meanwhile, Aaron Sorkin's new film, The Social Reckoning, depicts Zuckerberg as a villain who sees responsibility as anathema to profit. Two-thirds of Americans hold an unfavorable view of him, according to a Pew Research poll.

Yet here is the paradox that defines Meta's moment: none of this seems to matter to its business. User engagement on Instagram and WhatsApp rose 3 percent year over year. Second-quarter revenue climbed 28 percent compared to the same period in 2025. The company's stock price surged 4 percent the day the $18 billion settlement was announced and has gained more than 25 percent over the past month. Alison Taylor, an associate professor at New York University's Stern School of Business, describes the trust deficit as potentially existential—"once the public has stopped trusting you, it's kind of a downward spiral." Yet the data suggests consumers are willing to use Meta's products regardless of whether they trust the company. People will continue scrolling, messaging, and sharing even if they dislike the corporation behind the apps.

Meta's bet now rests on Muse, its new AI agent that can execute multi-stage tasks over hours, not just single queries like ChatGPT. Launched one month ago, Muse has already attracted more than five million downloads and three million weekly active users—outpacing ChatGPT's early adoption in North America. A New York Times reporter who tested it for two weeks said he was "blown away": the app called his dental insurer, ordered groceries, tracked credit card spending. But Muse demands something Meta has struggled to protect: intimate personal data. It needs credit card information, purchase histories, email access. For a company whose privacy reputation was shattered by the Cambridge Analytica scandal a decade ago—when millions of Facebook users' data was breached and weaponized by a political consulting firm—asking users to hand over such information is a monumental ask. Two days after Zuckerberg's keynote, another New Mexico jury found Meta had lied about how Facebook used personal information.

Zuckerberg addressed privacy concerns at Meta Connect, displaying an image of Muse embracing a blue padlock. He promised state-of-the-art security, describing a personal virtual machine—essentially a self-contained computer system in Meta's cloud—where user data would be stored. He said that eventually, "even Meta won't be able to see that information." Yet Kate Winick, a principal analyst at Forrester, notes that users must opt into many of these protections. "I think if they thought they could get away with not doing that, they would," she said. Shortly after the keynote, social media users reported Muse reading emails without permission. Meta disputed these claims, saying the agent only accesses emails with user consent.

The fundamental question is whether convenience will overcome caution. Patrick Moorhead, founder of Moor Insights & Strategy, believes consumers will make the trade-off if they see real benefit. "If the consumer sees the trade-off as beneficial, then they'll keep it going," he said. "This is why Facebook and Instagram still have billions of users." Meta's advertising business generated $60.8 billion in revenue and $15.9 billion in profit in the second quarter alone. That cash has funded everything from the much-mocked Metaverse to the current massive expansion of AI infrastructure. But AI investment is expensive: Meta now carries $83.7 billion in long-term debt. Andrew Bosworth, Meta's chief technology officer, framed the company's pivot in optimistic terms: an agent "who can do work on your behalf, who is your constant ally in whatever you're trying to accomplish." Meta has laid out a vision of Muse paired with an expanding line of smart glasses, enabling hands-free access to what Zuckerberg calls "personal superintelligence." The glasses themselves are controversial—some have labeled them "pervert glasses" because they can film covertly—and Meta has moved to prevent tampering with the recording indicator. Brooke Istook of the Heat Initiative, a campaign group, remains skeptical: "Consumers know that Meta has problems, and that to date we haven't been able to trust them to make their products safe for children. So why would a consumer want to trust them with some of their most private and sensitive information?" The answer, it seems, may depend on whether the convenience of AI agents outweighs the accumulated weight of scandal. For now, Meta's business suggests it will.