Meta Stock Drops Amid Rising Costs for AI Investments
Meta Platforms (META) reported strong second-quarter revenue of $60.8 billion, with advertising income rising by 27% to $59.36 billion and daily active users increasing across its platforms. Despite these gains, the stock fell nearly 9% as investors focused on declining free cash flow and soaring expenses tied to AI development. Meta’s capital expenditures surged to $31.08 billion in Q2 alone—almost entirely consuming operational cash flow—and it raised full-year capex guidance to between $130 billion and $145 billion. R&D costs also jumped significantly, reaching $21.66 billion for the quarter. Operating margin dropped from 43% a year ago to just 31%, with net income falling by 14%. The company now faces pressure to demonstrate that its AI investments will yield returns soon enough to justify their cost. While Meta’s ad business remains robust, investors are concerned about the sustainability of such high spending without clear signs of future profitability from new ventures.
Tickers: $META