Meta's free cash flow falls sharply on AI capex as Q2 profit misses

Meta reported second-quarter 2026 revenue of $60.8bn, up 28% year on year and roughly $620m above analyst consensus, driven by continued growth in advertising. Earnings per share came in at $6.18, well below the roughly $7.10 analysts had expected, as operating income fell 8% and net income fell 14% despite the revenue growth. Free cash flow collapsed to $784m, down from an average of roughly $12bn a quarter over the prior two years, as around $31bn in AI infrastructure capital expenditure and $2.4bn in legal charges consumed most of the company’s operating cash.

Meta’s stock fell as much as 10% in after-hours trading, later recovering somewhat to close down around 7%. The company raised the low end of its full-year 2026 capital-expenditure guidance to a range of $130bn–$145bn, from $125bn–$145bn previously — a narrower but higher-floor range signalling continued commitment to the spending rather than any pullback. Chief financial officer Susan Li declined to give a specific figure for 2027 spending, saying only that Meta expected to remain “demand constrained,” with more profitable uses for computing capacity than it currently had available. Mark Zuckerberg said he was confident “investors in this are going to be rewarded.”

The results landed in the same week as stronger-than-expected numbers from Alphabet and Microsoft, sharpening a live argument among investors over whether the current scale of AI capital spending across large technology companies was translating into revenue fast enough to justify it, or whether the industry was building capacity ahead of demonstrated demand.