Meta's AI Spending Sparks Financial Worries as Cash Flow Declines

Meta's decision to invest aggressively in AI has raised investor concerns as the company's cash flow declines. The move has left investors questioning the price Meta is paying in the AI race. Meta's cost burden has been rising, worrying investors.

Meta (META) reported record second-quarter 2026 revenue of $60.8 billion, beating analyst estimates, but free cash flow collapsed 91% to just $784 million as the company poured $31.1 billion into AI infrastructure during the quarter alone.

The gap between the revenue headline and the cash-flow reality is why investors reacted so negatively: shares fell roughly 10% in after-hours trading, from a $585.61 close to about $529.15, as the market weighed a revenue beat against a much more expensive AI buildout than expected.

Total expenses climbed 55% to $42.0 billion in the quarter, including $2.4 billion in legal charges, which compressed operating margin to 31% from 43% a year earlier. Net income came in at $15.8 billion, with diluted earnings per share of $6.18, both below analyst expectations even as the top line set a record.

Meta also narrowed its full-year 2026 capital expenditure guidance to a range of $130 billion to $145 billion, up from a prior $125 billion to $145 billion, raising the floor rather than cutting it, a signal management intends to keep spending at this pace rather than pull back. Investors could watch whether that spending eventually shows up in ad-revenue growth or new AI products, or whether margin pressure persists into the back half of the year.

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