Meta's Free Cash Flow Plunges 91% as Zuckerberg Doubles Down on AI Investment

Meta Platforms reported a dramatic 91% decline in second-quarter free cash flow, highlighting the enormous cost of Chief Executive Mark Zuckerberg's aggressive investment in artificial intelligence despite continued strength in the company's advertising business.

The sharp increase in AI infrastructure spending overshadowed strong revenue growth, raising fresh questions among investors about when Meta's multibillion-dollar AI strategy will begin generating meaningful returns.

Meta's Free Cash Flow Plunges 91% as Zuckerberg Expands AI Spending — photo 1

Free Cash Flow Drops as AI Spending Accelerates

Meta reported free cash flow of $784 million for the second quarter ended June 30, down sharply from $8.55 billion during the same period last year.

The decline marked the company's weakest free cash flow performance since late 2022 and prompted investors to push Meta shares lower in after-hours trading.

Meta's Free Cash Flow Plunges 91% as Zuckerberg Expands AI Spending — photo 2

The company attributed the weaker cash generation primarily to massive investments in AI infrastructure and computing capacity.

Zuckerberg Bets on AI as the Next Major Business

During the earnings call, CEO Mark Zuckerberg said Meta expects much of its growing computing power to support:

Meta's Free Cash Flow Plunges 91% as Zuckerberg Expands AI Spending — photo 3

  • Training advanced AI models

  • Expanding core products

  • Developing personal AI assistants

  • Serving enterprise AI customers

Zuckerberg argued that personal AI agents could become one of the company's largest long-term consumer businesses, despite the substantial upfront investment required to build the technology.

Meta believes its scale and global user base position it to commercialize AI more effectively than many competitors.

Revenue Continues to Grow Strongly

Despite the sharp decline in cash flow, Meta's core business remained strong.

The company reported:

  • Revenue increased 28% to $60.8 billion

  • Daily active users reached 3.6 billion, up 3% year over year

The growth was driven primarily by Meta's advertising business, which continues to generate the vast majority of the company's revenue.

Analysts noted that advertising performance remains the financial engine supporting Meta's expanding AI ambitions.

Earnings Miss Expectations

Meta reported adjusted earnings per share (EPS) of $6.18, below analysts' expectations of $7.22.

Operating income also declined 8% during the quarter, reflecting higher AI infrastructure spending, legal expenses, and restructuring costs.

The company said operating income would have increased without one-time legal charges and severance expenses related to its organizational restructuring.

AI Infrastructure Spending Reaches New Highs

Meta significantly increased its capital spending plans as it accelerates development of AI infrastructure.

The company now expects 2026 capital expenditures between $130 billion and $145 billion, raising the lower end of its previous guidance.

Management also plans to:

  • Expand computing capacity to 7 gigawatts this year.

  • Double computing power again to 14 gigawatts next year.

  • Continue expanding its global network of 32 data centers, either operating or under construction.

The investments are part of Meta's broader strategy to compete with rivals in generative AI and advanced computing.

Legal and Regulatory Challenges Continue

Alongside its AI investments, Meta continues to face significant legal risks.

The company disclosed that several U.S. states are pursuing legal action related to allegations involving the safety of young users on Facebook and Instagram.

Meta also warned that increasing regulatory scrutiny in both the United States and European Union could materially affect its future financial performance.

The company recently reduced its workforce by approximately 8,000 employees as part of a broader restructuring designed to prioritize AI development.

Outlook

Meta remains committed to investing heavily in artificial intelligence despite near-term pressure on profitability and cash flow.

Investors will closely monitor whether continued growth in advertising revenue and future AI products can justify the company's unprecedented infrastructure spending while offsetting ongoing legal and regulatory challenges.