Meta Platforms' free cash flow evaporated 91 percent in the second quarter, dropping to $784 million from $8.55 billion a year earlier, as the company doubled down on an AI infrastructure buildout that now rivals the metaverse bet that once rattled investors. Shares fell 10 percent in extended trading, a move that echoed the selloff in Alphabet last week after the Google owner posted its first-ever cash-flow-negative quarter.
The spend is the story
Meta expects to spend as much as $145 billion on AI infrastructure this year, roughly double last year's outlay and a sizable slice of the more than $700 billion Big Tech is projected to deploy in 2026. The company raised the lower end of its capital expenditure guidance to $130 billion from $125 billion; at the start of the year the range was $115 billion to $135 billion. Reuters reported this month that Meta plans to double computing capacity to 7 gigawatts in 2026 and double it again to 14 gigawatts in 2027, across 32 data centers in operation or under construction.
The metaverse echo
Free cash flow hit its lowest level since late 2022, when Reality Labs losses, now exceeding $80 billion cumulatively, drew similar scrutiny. Microsoft, by contrast, saw a 23 percent free cash flow decline in the June quarter but cushioned the blow with surging high-margin cloud growth. Meta remains almost entirely advertising-dependent, and the market is asking whether AI can diversify that revenue base before the bills come due.
The bull case survives on the ad engine
Revenue jumped 28 percent to $60.8 billion, the fastest pace since the fourth quarter of 2021 excluding the first quarter of this year. Daily active people across Meta's apps rose 3 percent to 3.6 billion, rebounding from an April dip. "Meta's underlying ad business that's financing everything though is still performing well and is our main focus," said Luke Stillman, managing director at Madison and Wall. Earnings per share of $6.18 missed the $7.22 LSEG consensus, but the top-line momentum gives Zuckerberg runway.
The timeline is the risk
"We expect that a significant portion of our compute is going to go towards training our models, growing our core business and delivering personal agents and new products, but we also expect to grow a large business serving large customers as well," Zuckerberg told analysts. Forrester's Mike Proulx framed it bluntly: "Meta's AI spend was easier to celebrate when margins were expanding. It's harder to celebrate now that the costs are showing up in the numbers." The company insists AI will create entirely new businesses, not just improve Facebook and Instagram. Investors are being asked to finance that conviction with a cash flow profile that looks uncomfortably familiar.