Meta’s Revenue and Cash Flow: A Contrasting Narrative with Microsoft's AI Spending
Meta’s revenue rose 28% to $60.8 billion, but profit fell 14%, free cash flow collapsed 91% to $784 million, and shares dropped about 5% on July 29, 2026, according to CNBC.
The Discrepancy with Microsoft
In contrast, Reuters reports that Microsoft’s AI spending translates directly into cloud revenue. Meta, however, lacks a cloud business to offset its substantial AI investments, leaving investors to grapple with rising costs without immediate new revenue streams.
Key Figures:
- Revenue: $60.8 billion (28% increase)
- Profit: $15.8 billion (14% decrease)
- Free Cash Flow: $784 million (91% decrease)
The AI Investment and its Impact:
Meta's AI spending, amounting to approximately $31 billion in the quarter alone, is expected to reach between $130 billion and $145 billion for the full year, a significant increase from last year's $72 billion. This rapid expansion comes at a cost, with no immediate cloud revenue to show for it.
Comparisons with Competitors:
- Microsoft: Spends on AI and has a profitable cloud business to rent out capacity.
- Alphabet: Also reported negative free cash flow last week due to similar investments.
One-off Costs and Legal Challenges:
Meta's financial report included $2.4 billion in charges related to legal proceedings and $1.18 billion in severance from laying off about 8,000 staff in May. These factors contributed to a significant drop in operating margin to 31%.
Future Risks:
Meta faces further legal challenges this year regarding youth-related trials in the US that could result in substantial losses. Their Reality Labs unit, focused on headsets and glasses, incurred another $4.6 billion in losses, bringing the total to over $80 billion.
Despite these challenges, Meta's CEO Mark Zuckerberg expressed optimism about AI's impact on their core business, highlighting new products and enterprise opportunities. However, investors sought evidence of a payoff from the substantial spending, which was lacking in the current financial report.