Meta's free cash flow plunged 91% in the second quarter of 2026 as the company ramps up spending on artificial intelligence, data centers, and computing hardware, reports infohub.kz.
The company generated just $784 million in free cash flow for the three-month period, down from $8.55 billion a year earlier. Shares fell about 10% in after-hours trading following the release.
Despite the cash flow decline, Meta's core business continues to grow: quarterly revenue rose 28% to $60.8 billion, driven primarily by advertising on Facebook and Instagram.
CEO Mark Zuckerberg said computing resources are being directed toward training AI models, developing social networks, creating personal assistants, and building new products. "A significant portion of our compute capacity will go toward training models, advancing our core business, personal agents, and new products," he said.
Meta currently operates or is building 32 data centers worldwide, 28 of which are in the United States. The company expects capital expenditures for 2026 to be between $130 billion and $145 billion, raising the lower end from $125 billion; the initial forecast was $115 billion.
Meta's debt continues to grow, with long-term debt nearing $60 billion. Other tech giants face similar challenges as they invest hundreds of billions in servers, data centers, and AI equipment. Morgan Stanley estimates that major tech companies' AI spending could surpass $700 billion in 2026 and $1 trillion in 2027.
"Revenue is growing, but expenses are rising even faster. Investors are concerned about the deterioration in free cash flow amid high capital expenditure," said Thomas Monteiro, analyst at Investing.com. However, experts note the resilience of Meta's advertising business, which continues to fund AI investments.
Meta also faces legal and regulatory risks. Four U.S. states are seeking fines totaling up to $1.4 trillion, alleging that Facebook and Instagram are addictive for minors and that Meta failed to adequately disclose potential risks. The company also warned that new laws and restrictions in the U.S. and European Union could negatively impact its business and financial performance.