Meta shares dropped about 10% on Wednesday after the company reported second-quarter results showcasing heavy AI investments and a weaker-than-expected revenue forecast.
The market response shows that investors are becoming more cautious about AI investments and want clearer evidence that the spending will generate profits.
Meta’s free cash flow fell to $784 million from $8.55 billion, a 91% drop in Q2 compared to a year prior. The company now expects annual capital spending of $130 billion to $145 billion.
The tech giant is still generating strong profits, but its AI push is driving a sharp increase in spending. The company’s capital expenditures on AI infrastructure, including servers and data centers, rose 83% to $31.08 billion. Meta said those investments are beginning to yield results, with AI enhancements contributing to 27% growth in ad revenue.
Meta expects third-quarter revenue between $61 billion and $64 billion, below Wall Street’s forecast of $63.15 billion.
Daily active users across its apps reached 3.6 billion. CEO Mark Zuckerberg said Meta remains focused on expanding its AI business. He revealed that more than 1 million businesses already use Meta’s AI agents each week.