Meta’s AI Spendings Are Burning Almost All of Its Cash Flow

Meta just posted revenue of $60.8 billion, up 28 percent year over year, which sounds great until you look at the other side of the ledger. Costs jumped 55 percent to $42 billion, nearly double the pace of revenue growth, and net income slid 14 percent to $18.3 billion. The real gut punch is free cash flow: it fell 91 percent, from $8.55 billion a year ago to just $784 million. Capital expenditures, mostly servers and data centers, surged 83 percent to $31.08 billion, essentially eating the entire operating cash flow gain. CFO Susan Li calls this financial discipline. The market called it a ten percent after-hours haircut.

Zuckerberg's pitch operates on three timelines. Right now, AI is juicing ad targeting and recommendations, which is a big reason ad revenue climbed 27 percent — that part's already working. In the middle distance, Meta is racing to catch up on frontier models through its restructured Meta Superintelligence Labs, led by Alexandr Wang. Muse Spark powers Meta AI today, with an upgraded model nicknamed Watermelon due this fall, but by Meta's own benchmarks it still lags OpenAI and Google on coding and reasoning. The long game, the one Zuckerberg actually seems to believe in, is personal AI agents living inside WhatsApp and Messenger — handling your finances, your health, your household — for what he says will be billions of users within five years. WhatsApp business agents already claim over a million company users, which Meta is treating as early proof of concept.

And then there's the spending itself, which has become almost its own story. Meta raised its 2026 capex guidance to a range of $130 billion to $145 billion. This week alone brought a $14 billion data center deal with BlackRock in El Paso. Zoom out and the big US tech firms are collectively dumping over $700 billion into AI infrastructure this year, with talk of $1.5 trillion across 2026 and 2027 combined. Google's free cash flow just went negative for the first time in decades; Microsoft, by contrast, got rewarded by investors for holding its spending steady. Wall Street, it seems, wants restraint right now, and Meta is doing the opposite at scale.

There's a wrinkle worth noting: Meta doesn't have a cloud business to soak up idle compute the way Amazon, Google or Microsoft do. Zuckerberg is floating the idea of selling raw computing power directly, and there's already a live conversation with Anthropic worth up to $10 billion. He's also candid about the lag — data centers take time to build before they generate anything, so the payoff is deferred by design. Meanwhile Reality Labs keeps bleeding money, $4.6 billion lost this quarter alone and roughly $88 billion cumulatively since 2021, and Meta is still fighting nine bellwether lawsuits over platform addictiveness, having lost the first in March. The user base keeps ticking up regardless, 3.6 billion people now, growing at a modest but steady three percent.