Meta Raises AI Spending Forecast as Revenue Jumps and Cash Flow Collapses
Second-quarter sales rose 28%, yet free cash flow fell 91% as capital spending on AI heads toward $145 billion. Meta narrowed its forecast by raising the low end, expecting to spend between $130 billion and $145 billion in 2026, up from a prior range that started at $125 billion.
Key Takeaways:
- Rapid Revenue Growth: Meta reported second-quarter revenue of $60.8 billion, up 28% year-over-year, its quickest growth since late 2021.
- Dominant AI Impact: Improved AI recommendations boosted engagement on Instagram and Facebook, driving ad revenue.
- Stagnating Cash Flow: Despite strong revenue, free cash flow plummeted to $784 million, down 91% from the previous year, primarily due to heavy AI investment.
- Legal Costs Mount: Meta recorded a $2.4 billion charge in the quarter and faces potential penalties of up to $1.4 trillion from US states over claims its products are designed to addict young users.
- Expanding User Base: Daily active users across Meta’s apps reached 3.6 billion, a 3% year-over-year increase.
- Future Strategy: Zuckerberg aims to grow a business renting out AI compute, turning its infrastructure into a revenue stream. He emphasizes that the same data centers will eventually pay for themselves.
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