Meta raises AI capital spending as shares fall 11%
Meta increased its AI-related capital expenditures to at least $130 billion, while its stock dropped over 11% and free cash flow fell to a five-year low.
Meta announced on its second-quarter earnings call that it is raising capital expenditures from $125 billion to at least $130 billion, reflecting a continued investment in artificial-intelligence initiatives. The company’s shares fell more than 11 percent over the following five days.
Revenue for the quarter rose 28 percent year over year, but free cash flow dropped to its lowest level in at least five years, which the company attributed to higher AI spending. CEO Mark Zuckerberg said the additional AI investment is "accelerating every part of our core business" and noted that some of the technology could be sold to other firms.
Meta’s AI projects include the Muse Spark model, whose version 1.1 was released on July 11, and an image-generation model called Muse Image. Analysts noted that the models currently lag behind competing offerings from OpenAI, Anthropic and Google. Forrester analyst Mike Proulx said Meta is "spending ahead of proven product demand," drawing a parallel to the company’s earlier metaverse investments.
Investors have expressed concern that the increased spending may not translate into immediate profitability, especially as the broader tech sector faces scrutiny over large data-center investments.