Meta’s AI spending spree erodes free cash flow by 91%

Capital expenditures reached $31.08 billion this quarter, an 83% surge driven by the urgent need to build out infrastructure for Meta’s AI systems. These investments support the company’s advertising machine, which saw a 27% revenue increase as AI-driven content recommendations and ad matching improve performance. Despite these operational gains, the sheer scale of spending has spooked investors, sending Meta’s stock down nearly 10% in after-hours trading.

CEO Mark Zuckerberg defended the strategy, noting that the massive capital outlay for data centers is a long-term play. These facilities often sit idle during their construction phase, meaning the company incurs costs well before the assets generate value. With total projected capital expenditures hitting $145 billion for the year, Meta is betting heavily that its overhauled Meta Superintelligence Labs and models like Muse Spark will secure its competitive standing against rivals like Google and OpenAI. Chief Financial Officer Susan Li maintains that the company’s robust operating cash flow provides a sufficient buffer to sustain this buildout, even as the market signals a clear preference for fiscal restraint.