Meta revenue beats estimates as free cash flow plunges 91%
▼ Summary
– Meta’s revenue rose 28% to $60.8 billion, but profit fell 14% to $15.8 billion, causing shares to drop about 5% after hours.
– Free cash flow plummeted 91% to $784 million from $8.55 billion a year earlier, as spending now outpaces incoming cash.
– Meta spent about $31 billion on capital projects in the quarter, with full-year guidance raised to $130–$145 billion, roughly double last year’s $72 billion.
– Unlike Microsoft and Alphabet, Meta lacks a cloud business to rent out AI capacity, so investors see high costs without a clear new revenue stream.
– One-off costs included $2.4 billion in legal charges and $1.18 billion in severance from layoffs, while operating margin fell to 31% from 43% a year earlier.
Two of the world’s biggest spenders on artificial intelligence delivered their quarterly reports on the same day , and the results couldn’t have looked more different. For Microsoft, heavy investment showed up as surging cloud revenue. For Meta, it showed up as a gaping hole in cash flow.
Meta’s revenue climbed 28% to $60.8 billion, surpassing analyst expectations, according to CNBC. But profit dropped 14% to $15.8 billion, earnings per share missed forecasts, and shares slid roughly 5% in after-hours trading.
Free cash flow took the hardest hit, plunging 91% to $784 million from $8.55 billion a year earlier, Reuters reported. The company is now spending money faster than it’s coming in.
The culprit is the massive AI infrastructure build-out. Meta spent approximately $31 billion on capital projects in the quarter alone and tightened its full-year guidance upward to between $130 billion and $145 billion. Last year, it spent $72 billion. The bill is essentially doubling.
Here’s where Meta diverges from its rivals. Both Microsoft and Alphabet can point to cloud businesses that rent out AI capacity, generating new revenue from their spending. Meta has no such business. Its investment funds its own apps and models, so investors see the cost without an obvious new income stream.
Meta isn’t alone in the squeeze. Alphabet reported its first-ever negative free cash flow just last week. And the financing is shifting off the balance sheet. This week, Meta formed a $14 billion data-center venture with BlackRock, which will own 80% of the campus.
Two one-off costs deepened the profit decline. Meta booked $2.4 billion in charges tied to legal proceedings and $1.18 billion in severance from its May layoff of roughly 8,000 employees. Operating margin fell to 31%, down from 43% a year earlier.
More legal trouble looms. Meta’s finance chief warned of youth-related trials in the U. S. this year that “may ultimately result in a material loss.” Meanwhile, Reality Labs, its headset and glasses division, lost another $4.6 billion, pushing its cumulative losses past $80 billion.
CEO Mark Zuckerberg struck an optimistic tone. “AI is accelerating our core business today,” he said, pointing to new products and enterprise opportunities. The ad business backs him up, with impressions up 14% and prices up 12%.
But the market wanted clearer proof that the spending pays off , and didn’t get it. Revenue remains strong, yet profit is shrinking and cash is draining. Same day, same AI bet as Microsoft, but a very different verdict.
(Source: The Next Web)
