Meta Stock Drops Amid Heavy Cash Burn from AI Investments
Meta Platforms (META) reported a strong second-quarter revenue of $60.8 billion with advertising income rising by 27% to $59.36 billion and daily active users reaching an average of 3.6 billion in June, up 3%. Despite these positive metrics, the stock fell nearly 9% as investors focused on declining free cash flow due to massive capital expenditures tied to AI infrastructure. Meta’s operational cash flow was $31.86 billion for Q2 but only generated a meager $784 million in free cash flow after spending $31.08 billion on property and equipment—mostly chips, servers, data centers, and networking gear needed for its AI ambitions. Capital expenditures now exceed revenue growth expectations as Meta raised 2026 guidance to between $130 billion and $145 billion. The company also faced rising costs from litigation charges ($2.4 billion) and severance expenses ($1.18 billion), contributing further to a sharp decline in net income (down 14% year-over-year). With R&D spending up significantly, Meta faces pressure to justify its AI investments while maintaining margins and defending against legal challenges.
Tickers: $META
Topics: AI investment cash burn Meta stock price drop