- Meta now expects to spend as much as $145b on AI infrastructure this year, approximately double last year’s investment.
- Revenue surges 28% to $60.8 billion while app usage rebounds after a dip in April, with daily active people rising 3% year-over-year to 3.6b.
- Company plans to double its overall computing power to 7 gigawatts this year and double it again to 14 gigawatts next year. It currently operates or is constructing 32 data centres worldwide.
Meta Platforms delivered a gut punch to Wall Street on Wednesday, reporting a staggering 91 per cent collapse in quarterly free cash flow that laid bare the enormous financial toll of its artificial intelligence ambitions.
The Facebook and Instagram parent generated just $784 million in free cash flow during the second quarter ended June 30 — a precipitous decline from the $8.55 billion it produced a year earlier. Investors recoiled, sending shares down 10 per cent in extended trading.
The cash flow wipeout mirrored a similarly jarring report from Alphabet a week prior, when the Google parent posted its first-ever cash-flow-negative quarter and triggered a selloff that rattled even the most bullish tech investors. Together, the two reports mark an inflection point in the AI arms race: the bill is coming due, and the payoff remains tantalisingly out of reach.
The bet on personal AI
Meta CEO Mark Zuckerberg, fielding a barrage of questions from analysts about capital allocation and return on investment, framed the spending as a generational wager on personal AI agents becoming a massive consumer business.
“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,” Zuckerberg said on the earnings call. “But we also expect to grow a large business serving large customers as well.”
He argued that Meta is uniquely positioned to commercialise AI at scale, even as the near-term costs squeeze the bottom line. The thesis, still unproven, is that the company’s vast user base — 3.6 billion daily active people across its apps — will eventually translate into an AI ecosystem that generates revenue streams well beyond advertising.
For now, though, the numbers tell a different story. Meta’s free cash flow hit its lowest level since late 2022, when the company was weathering a similar storm of investor scepticism over its multibillion-dollar metaverse gamble. That bet has yet to pay off: Reality Labs, the division housing Meta’s virtual-reality and augmented-reality efforts, has racked up more than $80 billion in cumulative operating losses.
Meta now expects to spend as much as $145 billion on AI infrastructure this year, approximately double last year’s investment, and a significant slice of the more than $700 billion in projected Big Tech capital outlays for 2026. The company plans to double its overall computing power to 7 gigawatts this year and double it again to 14 gigawatts next year. It currently operates or is constructing 32 data centers worldwide.
The company raised the lower end of its capital expenditure guidance on Wednesday, forecasting 2026 capex between $130 billion and $145 billion, up from the prior range of $125 billion to $145 billion. At the start of the year, Meta had projected spending between $115 billion and $135 billion — a trajectory that has consistently moved in only one direction.
Amid the spending anxiety, Meta delivered a genuinely strong top-line performance. Revenue surged 28 per cent to $60.8 billion, the fastest pace of growth since the fourth quarter of 2021, excluding the anomalous first quarter of 2026. App usage rebounded after a dip in April, with daily active people rising 3 per cent year-over-year to 3.6 billion.
Yet even that foundation faces threats from an entirely different direction: a mounting legal assault over youth safety. Meta disclosed in a court filing this month that four states are seeking $1.4 trillion in penalties, accusing the company of deliberately designing Facebook and Instagram to addict young users and misleading the public about platform safety.
In April, the company warned that legal and regulatory actions in the European Union and the US. “could significantly impact” its business and financial results — a warning it reiterated on Wednesday.
The quarter also bore the marks of a sweeping internal restructuring aimed at reorienting the company around AI. In May, Meta laid off approximately 10 per cent of its workforce, or roughly 8,000 employees. The severance costs, combined with legal charges, weighed heavily on the income statement. Chief Financial Officer Susan Li noted on the earnings call that operating income would have grown 9 per cent year-over-year excluding those items; instead, it fell 8 per cent.
“We continue to see scrutiny on youth-related issues in several markets and have a number of youth-related trials scheduled for this year in the US, which may ultimately result in a material loss,” Li said in the earnings statement.