Meta Free Cash Flow Drops 91% on AI Spending
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- Meta reported a 91% drop in second-quarter free cash flow to $784 million from $8.55 billion a year earlier, driven by soaring AI infrastructure costs
- Meta raised the lower end of its 2026 capital expenditure forecast to $130–$145 billion, up from an initial $115–$135 billion, reflecting accelerated AI investment
- Meta generated $60.8 billion in revenue for Q2, a 28% year-over-year increase and the fastest growth since Q4 2021, excluding Q1 2026
- Meta now operates or is constructing 32 data centers globally, with 28 located in the U.S., as part of its expanding AI compute capacity
- Meta faces legal scrutiny over youth safety, with four U.S. states seeking $1.4 trillion in penalties over alleged addictive design of Facebook and Instagram
- Meta CFO Susan Li stated that operating income would have risen 9% year-over-year without legal charges and severance costs, though it actually fell 8%
Why it matters: Meta is sacrificing near-term financial health—burning cash and increasing debt—to bet on AI dominance, a move that pressures investor confidence as legal liabilities grow and returns remain unproven. The $130B+ capex commitment makes reversals costlier and raises the stakes for product payoff.
