Meta raises AI spending floor as quarterly free cash flow collapses
The social media giant has committed to a higher minimum budget for artificial intelligence infrastructure, highlighting the severe financial strain of the technology race even as advertising revenue surges.
Meta has committed to spending at least $130 billion on artificial intelligence infrastructure this year, raising the floor of its capital expenditure forecast. The new range of $130 billion to $145 billion replaces a previous estimate that began at $125 billion, effectively doubling the company's planned outlay from a year ago.
This massive investment is arriving alongside a surge in top-line growth, with second-quarter revenue reaching $60.8 billion. The 28 per cent year-on-year increase marks the company's quickest revenue expansion since late 2021, driven by a resilient advertising market and AI-tuned recommendations that keep users scrolling.
However, this growth is not translating into bottom-line liquidity, as free cash flow plummeted to $784 million. That figure represents a 91 per cent drop from the $8.55 billion recorded a year earlier, demonstrating how rapidly the AI build-out is consuming the cash generated by its core business.
Profitability also faced pressure, with earnings per share coming in at $6.18, missing the $7.22 expected by analysts. This shortfall was partly driven by a $2.4 billion legal charge, reflecting ongoing litigation where a group of US states is seeking up to $1.4 trillion in penalties over claims the platforms addict young users.
Despite the financial strain, the user base continues to expand, with daily active people across its applications reaching 3.6 billion, a 3 per cent year-on-year increase. Chief executive Mark Zuckerberg defended the spending on the earnings call, stating that the compute power will train models, feed the advertising engine, and power "personal agents" for consumers.
To justify the expenditure to investors, Zuckerberg outlined plans to "grow a large business serving large customers" by renting out AI compute. This strategy aims to transform the vast infrastructure from a pure cost centre into a cloud-style revenue stream, answering investor concerns about when the spending will become profitable.
For European investors and markets, the results underscore a broader technology trend where surging AI investments are rapidly outpacing the cash they generate. Meta is effectively spending like a cloud provider without currently holding that status, asking shareholders to trust that its advertising engine and superintelligence ambitions will eventually align.
Wall Street has largely tolerated this trade-off, keeping the shares stable on the assumption that a company growing revenue at 28 per cent can sustain heavy investment. The ultimate reckoning for the market will depend on timing, as the collapsing cash flow raises questions about how many more quarters the company can maintain this pace before a payoff materialises.
