Meta Shares Tumble as Rising AI Spending Slashes Free Cash Flow

Meta Platforms Inc. shares fell as much as 10 percent in after-hours trading after the company reported weaker-than-expected earnings, as soaring artificial intelligence investments sharply reduced free cash flow, Eva Roytburg reported for Barron's Daily.

Meta continues investing billions of dollars in artificial intelligence infrastructure despite pressure on earnings.

Operating income declined 8 percent, while net income fell 14 percent. Free cash flow dropped to US$784 million, narrowly remaining positive and well below the roughly US$12 billion average generated over the previous eight quarters.

Despite the earnings disappointment, second-quarter revenue increased 28 percent from a year earlier, exceeding analysts' expectations.

Operating income from the company's Family of Apps segment—which includes Facebook, Instagram, WhatsApp, and Messenger—declined to US$23.4 billion from US$25.0 billion a year earlier.

Although Meta's core business continued to generate strong revenue growth, profitability came under pressure as the company accelerated investments in artificial intelligence infrastructure.

Capital expenditures reached US$31.1 billion during the quarter, nearly double the amount spent a year earlier, as Meta invested heavily in servers, data centers, networking equipment, and AI chips.