Meta Platforms reported a 91 percent drop in second-quarter free cash flow on Wednesday, plunging to $784 million as heavy artificial intelligence spending accelerated. CEO Mark Zuckerberg defended the capital-intensive buildout on an earnings call, even as the company raised its full-year capital expenditure outlook to between $130 billion and $145 billion.
The social media giant reported free cash flow of $784 million in the second quarter ended June 30, down sharply from the $8.55 billion reported during the same period a year earlier. The steep decline sent the company’s shares down 10 percent in extended trading. The financial strain mirrors similar pressures at rival tech firms such as Alphabet, which recently posted negative free cash flow for the first time ever while spending $5.9 billion in the second quarter.
Despite the cash drain, Meta’s core advertising engine continued to post robust financial results. Revenue jumped 28 percent to $60.8 billion in the quarter, marking the quickest pace of growth since the fourth quarter of 2021, barring the first quarter of 2026.
AI Infrastructure Spending and Data Center Expansion
The aggressive capital expenditure outlook reflects a broader industry race among major technology companies. Meta narrowed its capital expenditure forecast for 2026 to between $130 billion and $145 billion, adjusting the lower end upward from its prior projection of $125 billion. At the start of the year, the company had projected capital spending between $115 billion and $135 billion.
To support its computing demands, Meta currently operates or is constructing 32 data centers across the globe, with 28 located in the United States. Financing structures for this infrastructure are also shifting away from pure balance sheet funding. This week, Meta announced a data center partnership with BlackRock .
“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.”
Mark Zuckerberg, CEO of Meta
Industry-wide spending on artificial intelligence is projected to reach well above $700 billion this year, with Morgan Stanley estimating that expenditures could surpass $1 trillion next year. Thomas Monteiro, a senior analyst at Investing.com, noted that the market is repricing a deteriorating free cash flow outlook in an environment defined by higher capital costs.
Legal Pressures and Operating Margin Contraction
Beyond infrastructure investments, profitability faced additional pressure from legal liabilities and restructuring expenses. The company booked charges in legal proceedings and severance costs.
Meta disclosed in a court filing this month that four states are seeking $1.4 trillion in penalties over allegations that Facebook and Instagram were designed to addict young users while misleading the public regarding platform safety. Li stated that the company faces several youth-related trials scheduled in the United States this year, which could result in material losses.
Reality Labs Losses and Future Outlook
While investors continue to scrutinize the mounting expenses across both AI infrastructure and hardware research, the company maintains that its expenditures lay the groundwork for future revenue streams. Executive leadership emphasized that investments in conversational personal agents and machine learning models will remain the primary driver for operations as subsequent product iterations roll out.
Related reading
