Meta Platforms Inc. saw its stock drop by 10% in after-hours trading on Wednesday, July 29, after reporting a dramatic collapse in free cash flow and disappointing earnings, as the company’s aggressive artificial intelligence infrastructure spending continues to strain its once-enviable financial model.
As per the Q2 report, the company has free cash flow of just $784 million. This marks a staggering 91% decline from $8.55 billion in 2025 and the lowest level since the third quarter of 2022, when Meta was heavily investing in its metaverse ambitions.
Operating Income declined 8% to $18.8 billion, and Net Income declined 14% to $15.85 billion.
Income before tax grew 28% to $60.8 billion, exceeding estimates of $60.17 billion due to a 14% rise in the number of advertising impressions and a 12% rise in advertising rates. But total expenses increased 55% to $42.03 billion, comprising legal expense of $2.4 billion and severance expense of $1.18 billion due to layoffs.
The company’s investment in AI servers, data centers, and chips has doubled raising to $31.1 billion. The company has raised its full-year capex guidance to between $130 billion and $145 billion.
CEO Mark Zuckerberg said on the earnings call: “Overall, 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.”
Meta’s Reality Labs division, which is engaged in the development of VR and AI-driven wearables, saw an operating loss of $4.6 billion against revenues of $431 million.
The firm did not conduct any stock buybacks during the quarter since it had already spent more than $10 billion on it in the previous year and issued bonds worth $24.9 billion instead. CFO Susan Li noted that Meta is shifting towards “more debt financing.”
2026-07-30 18:25:00
