Meta Platforms shares fell 10% in extended trading on July 29, 2026 after the company posted a Meta free cash flow plunge that wiped out nearly all of the cash cushion it had built up a year earlier. Free cash flow for the second quarter came in at just $784 million, down 91% from $8.55 billion in the same quarter of 2025, even as revenue jumped 28% to $60.8 billion, according to Meta’s own second-quarter earnings release and a Reuters report carried by Moneycontrol. The gap between soaring revenue and collapsing cash generation is explained almost entirely by one number: Meta now expects to spend as much as $145 billion this year building out AI infrastructure.
The Meta Free Cash Flow Plunge, By the Numbers
Meta’s own filing breaks the swing down cleanly: operating cash flow actually rose 25% to $31.86 billion, but $30.12 billion of property-and-equipment purchases plus $962 million of finance-lease principal payments consumed nearly all of it, leaving free cash flow at $784 million, the lowest quarterly figure since late 2022, when Meta faced similar investor scrutiny over its metaverse spending. Earnings per share came in at $6.18, missing the average Wall Street estimate of $7.22 compiled by LSEG. Operating income actually fell 8% year over year; Chief Financial Officer Susan Li told analysts it would have risen 9% if not for legal charges and severance costs tied to this year’s restructuring.
Why Zuckerberg Keeps Raising the Capex Ceiling
Wednesday’s results also came with another upward revision to Meta’s spending plans. The company narrowed its 2026 capital expenditure outlook to a range of $130 billion to $145 billion, up from the $125 billion to $145 billion it had guided to previously, and well above the $115 billion to $135 billion range it started the year with. Reuters reported this month that Meta plans to double its overall computing power to 7 gigawatts this year and double it again, to 14 gigawatts, in 2027, running 32 data centers worldwide that are either operating or under construction.
“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,” Zuckerberg said on the earnings call, defending the spending as a bet that personal AI agents will eventually become a major consumer business in their own right. He argued Meta was uniquely positioned to commercialize the technology at scale despite the near-term costs.
The Legal Bill Adding to the Cash Drain
AI infrastructure is not the only new cost weighing on Meta’s cash flow. In May, the company laid off roughly 10% of its workforce, or about 8,000 employees, as part of a restructuring meant to reorient the company around AI, and the associated severance expenses ate directly into this quarter’s operating income. At the same time, Meta disclosed in a court filing this month that four US states are seeking $1.4 trillion in penalties, alleging the company designed its Facebook and Instagram platforms to addict young users and misled the public about the risks. Li warned in the earnings statement that continued scrutiny “on youth-related issues in several markets” includes “a number of youth-related trials scheduled for this year in the U.S., which may ultimately result in a material loss.”
The Ad Business Still Carrying the Load
Despite the cash-flow scare, the underlying advertising business that funds Meta’s AI ambitions kept growing. Revenue rose 28% to $60.8 billion, the fastest pace since the fourth quarter of 2021 excluding the first quarter of 2026, while daily active people across Meta’s family of apps reached 3.6 billion, up 3% year over year, after usage rebounded from an April dip. “Meta’s underlying ad business that’s financing everything though is still performing well and is our main focus,” said Luke Stillman, a managing director at research firm Madison and Wall. Forrester’s Mike Proulx offered a more cautious read: “Meta’s AI spend was easier to celebrate when margins were expanding. It’s harder to celebrate now that the costs are showing up in the numbers. Meta isn’t spending billions on AI infrastructure just to make Facebook and Instagram better. The company believes AI can create entirely new businesses.”
How Meta’s 2026 Capex Guidance Has Climbed
| Guidance checkpoint | Full-year 2026 capex range |
|---|---|
| Start of 2026 (initial guidance) | $115 billion – $135 billion |
| Prior quarterly update | $125 billion – $145 billion |
| July 29, 2026 (current guidance) | $130 billion – $145 billion |
What to Watch Next
- Whether Q3 free cash flow stabilizes or falls further as AI capex spending continues.
- How the four-state $1.4 trillion penalty claim and other youth-related trials progress through the courts this year.
- Whether Meta’s compute buildout stays on pace toward 7 gigawatts this year and 14 gigawatts in 2027.
- Any early signs that personal AI agents or enterprise AI products are converting into meaningful new revenue.
- How Meta’s cash-flow trajectory compares with Alphabet, which reported its first-ever cash-flow-negative quarter days earlier.
Limitations and Open Questions
The $1.4 trillion figure is the amount four states are seeking in a court filing, not a judgment, settlement, or confirmed liability, and the case could take years to resolve or settle for a far smaller sum. Meta’s capital expenditure figures are guidance, not final actuals, and the range could move again next quarter. Comparisons with Alphabet’s and Microsoft’s cash flow rest on each company’s own accounting choices and reporting periods, which are not perfectly aligned, so they should be read as directional context rather than an apples-to-apples ranking.
Reader FAQ
What caused the Meta free cash flow plunge?
Operating cash flow actually grew 25%, but AI-related capital spending of roughly $30 billion in the quarter, plus finance-lease payments, consumed nearly all of it, leaving free cash flow at just $784 million.
Is Meta’s AI spending under control?
No spending cap was set. Meta raised the lower end of its 2026 capex guidance for the second time this year, to $130 billion-$145 billion, and executives signaled spending will keep rising into 2027 as compute capacity doubles.
How serious is the $1.4 trillion legal claim?
It is a penalty amount four states are seeking in a court filing over youth-safety allegations, not a finalized judgment. Meta’s CFO has flagged a realistic risk of a “material loss” from related trials scheduled this year.
Did Meta’s core business also struggle?
No. Revenue rose 28% to $60.8 billion and daily active people grew 3% to 3.6 billion, the fastest growth pace in years; the cash-flow plunge stems specifically from AI infrastructure spending and one-time legal and severance costs.
Bottom line: The Meta free cash flow plunge is less a sign of a weakening business than a company converting nearly all its operating cash into a single, enormous AI bet, at the same time it is absorbing severance costs and a $1.4 trillion legal claim. Revenue and user growth remain healthy; whether the AI spending translates into a comparable new revenue stream is the multi-year question investors are now pricing in.
Primary sources
- Meta’s free cash flow plunges 91% as Zuckerberg doubles down on $145-billion AI bet — Moneycontrol/Reuters
- Meta Reports Second Quarter 2026 Results — official press release
- Meta cash flow craters as Zuckerberg doubles down on AI spending — Reuters via Yahoo Finance
- Meta cash flow craters as Zuckerberg’s AI spending spree accelerates — The Straits Times
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