Meta shares slide as AI spending target rises

Meta Platforms shares fell 11% on Wednesday after the company lifted its artificial intelligence capital spending plans, signaling a heavier near-term cash and margin burden despite strong top-line growth.

The company reported second-quarter revenue of $61 billion, up 28% year-over-year. Net profit, however, declined 14% to $6 billion as operating costs increased, underscoring the immediate financial trade-off tied to the AI buildout.

AI budget reset drives a sharper cash-flow squeeze

Meta raised its full-year spending guidance to $130 billion to $145 billion. That range exceeded the $125 billion estimate the company provided three months earlier, pointing to a faster or broader expansion of AI-related infrastructure than previously outlined.

The spending increase coincided with a steep drop in free cash flow to $784 million. The company said this was the lowest level in at least five years, highlighting how quickly higher capital outlays can translate into reduced liquidity even when revenue is rising.

Management framed the change as a deliberate acceleration rather than a one-off swing, with costs rising as the company scales the computing and systems needed to train and deploy advanced AI capabilities across its products.

Monetization plans extend beyond ads to external clients

To help offset the increased investment, management said it plans to commercialize AI models and tools for outside business customers. That approach implies a move toward generating revenue not only from AI-enhanced engagement in Meta’s own apps, but also from selling AI capabilities to third parties.

Leadership also said the spending is intended to strengthen core advertising engagement and product development over time. Even so, the near-term results reflected pressure on margins, with profitability falling despite a double-digit revenue increase.

The company’s shift toward selling AI infrastructure marks a strategic change in how it could translate AI investment into future income. Management indicated that material revenue from these efforts is expected to build over the coming years rather than immediately, leaving investors to weigh current cash demands against longer-term monetization.

For now, the updated guidance and the free-cash-flow decline have put attention on execution risk and timing, particularly as Meta balances ambitious capital commitments with the need to maintain financial flexibility.