Meta shares tumble 10% as Mark Zuckerbergs AI spending spree stuns Wall Street | Latest Tech News
Meta Platforms reported a precipitous 91% drop in second-quarter free money movement on Wednesday, underscoring the financial pressure of the social media giant’s pricey AI buildout despite an unsure payoff.
The Facebook mum or dad company reported free money movement of $784 million in the second quarter ended June 30, down from $8.55 billion reported a 12 months earlier, sending its shares down 10% in prolonged trading.
Meta’s money movement wipeout echoed Alphabet’s, which last week said it was money movement unfavorable for the first time ever as it spent $5.9 billion in the second quarter. The fee of spending shocked even the most bullish of Wall Street traders, driving Alphabet’s stock down.
mark Zuckerberg’s Meta reported free money movement of $784 million in the second quarter, down from $8.55 billion reported a 12 months earlier, sending its shares down 10% in prolonged trading. Getty Images
Meta’s income jumped 28% to $60.8 billion in the quarter, the quickest tempo of growth since the fourth quarter of 2021, barring the first quarter of 2026.
“We expect that a significant portion of our compute is going to go towards training our models, growing our core business and delivering personal agents and new products, but we also expect to grow a large business serving large customers as well,” CEO Mark Zuckerberg said on an earnings call.
Meta at present has 32 data facilities across the globe in operation or under construction, with 28 of them in the US.
The company also raised the decrease end of its capital expenditure outlook. It now expects 2026 capital expenditure to be between $130 billion and $145 billion, in contrast with its prior forecast of $125 billion to $145 billion. At the start of the 12 months it had forecast capex between $115 billion and $135 billion.
Meta now expects 2026 capital expenditure to be between $130 billion and $145 billion, in contrast with its prior forecast of $125 billion to $145 billion. A $10 billion data heart complicated under construction in El Paso, Texas. USA TODAY Network via GWN Connect
The feverish spending by Big Tech is anticipated to attain nicely above $700 billion this 12 months, primarily on AI, while Morgan Stanley has pegged the estimated spend at more than $1 trillion for the next 12 months.
“Meta’s report echoes what we saw from Alphabet and Tesla last week: strong revenue growth, but even faster growth in spending. The market is repricing a deteriorating free cash flow outlook, and in an environment of higher capital costs, that does not sit well,” said Thomas Monteiro, senior analyst at Investing.com.
. Construction on a $1 billion 520-acre Meta data heart in Beaver Dam, Wisc. USA TODAY Network via GWN Connect
Luke Stillman, a managing director at research firm Madison and Wall, said: “Meta’s underlying ad business that’s financing everything though is still performing well and is our main focus.”
Meta’s legal troubles
While traders are scrutinizing Meta’s AI spending, it faces legal dangers associated to its core business. The company said in a court submitting this month that 4 states have been in search of $1.4 trillion in penalties over accusations it designed its Facebook and Instagram platforms to addict younger customers and misled the public about their security.
Meta had warned in April that legal and regulatory blowback in the European Union and the US over youth social media points “could significantly impact” its business and financial outcomes.
Meta had warned in April that legal and regulatory blowback in the European Union and the US over youth social media points “could significantly impact” its business and financial outcomes.
The company said on Wednesday that it continued to see this scrutiny.
On the call, Meta CFO Susan Li said second-quarter working income would have elevated 9% 12 months over 12 months without the company’s legal prices and severance bills. Operating income really fell 8%.
“We continue to see scrutiny on youth-related issues in several markets and have a number of youth-related trials scheduled for this year in the US, which may ultimately result in a material loss,” she said in the company’s earnings assertion.
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