Meta’s Higher AI Spending Outlook Rattles Investors, Shares Tumble After Earnings

Meta Platforms is pouring money into data centers, chips and computing capacity as it seeks to keep pace in the race to develop advanced artificial intelligence. Its Facebook, Instagram and WhatsApp advertising businesses still generate substantial cash, but investors are increasingly focused on whether those earnings can finance Chief Executive Mark Zuckerberg’s superintelligence ambitions without prolonged pressure on margins and shareholder returns.

Meta said on July 29 that second-quarter revenue rose 28% to $60.8 billion, while capital expenditures climbed 83% to about $31.1 billion in the three months ended June 30, 2026. Free cash flow plunged 91% to $784 million from $8.55 billion a year earlier, its lowest level in four years. The company raised its 2026 capital-spending forecast to $130 billion to $145 billion, and its shares fell as much as about 7% in after-hours trading.

Meta Platforms’ advertising engine across Facebook, Instagram and WhatsApp is financing one of Big Tech’s most aggressive artificial-intelligence build-outs. Investors are increasingly judging Chief Executive Mark Zuckerberg on whether spending on chips, data centers and AI talent can produce durable new revenue, rather than merely lift costs. That makes capital expenditure, profit margins and free cash flow central to the company’s valuation as Meta races rivals to develop advanced AI products.

Meta said on July 29, 2026 that second-quarter revenue rose 28% to $60.8 billion, topping the $60.22 billion FactSet consensus, while net income fell 14% to $15.85 billion. Earnings of $6.18 a share missed the $7.19 estimate as $2.4 billion of legal charges and $1.18 billion of severance costs pushed quarterly expenses up 55% to $42.03 billion. The company forecast third-quarter sales of $61 billion to $64 billion and narrowed 2026 capital spending guidance to $130 billion-$145 billion. Shares dropped more than 6% in extended trading.

Meta is accelerating construction of data centers and purchases of servers and computing chips needed to support generative AI, with its vast infrastructure requirements increasing funding pressure. Raising money in the bond market allows the company to finance its expansion while preserving cash flexibility, but has also sharpened investor scrutiny of whether its AI services can generate advertising and product revenue.

Meta recently completed a $25 billion bond offering to fund AI infrastructure in 2026 and raised the upper end of its full-year capital spending plan to $145 billion. Despite strong demand for the bonds, investors continue to question the returns on Meta’s heavy AI investment because the company has yet to provide a clear timeline for monetizing its products.