Meta Burns Through Nearly All Its Q2 Cash on AI Spending

Meta released second-quarter 2026 results that show just how heavily its artificial intelligence investments are weighing on the company's finances. Revenue rose 28 percent year over year to $60.8 billion, but earnings per share fell and free cash flow shrank to nearly nothing. Investors responded by selling off the stock.

Record revenue, lower profit

Meta's second-quarter revenue reached $60.8 billion, with $59.4 billion coming from advertising, which grew 27 percent year over year. Even so, net income fell to $15.8 billion from $18.3 billion a year earlier, and operating margin shrank from 38 to 31 percent. Total operating expenses rose 55 percent year over year, to $42.0 billion.

The results were also weighed down by one-time items: $2.4 billion in legal charges and $1.2 billion in severance costs for laid-off employees. Research and development spending reached 36 percent of revenue, up from 27 percent a year earlier, underscoring how much of the company's resources have shifted toward AI projects.

Cash reserves thinning out

The metric most worrying to investors is free cash flow, the cash left over after covering operating and capital expenses. In the second quarter it came to just $784 million, down from $10.9 billion a year earlier. Spending on AI infrastructure, including data center construction and chip purchases, consumed nearly all the cash generated from operations.

Meta's leadership also raised the lower bound of its full-year 2026 capex guidance from $125 billion to $130 billion, while keeping the upper bound at $145 billion. That means this year's AI infrastructure spending could be nearly double the $72.2 billion spent in 2025.

Zuckerberg defends the strategy

Meta CEO Mark Zuckerberg defended the scale of the investments on the analyst call, pointing to signs of improvement in advertising and recommendations driven by AI models. The company says AI systems used in ad auctions and recommendations increased ad impressions by 18 percent year over year.

Every signal we see in our work and across the industry gives us confidence in this investment - Mark Zuckerberg, CEO of Meta

Asked directly about the timeline for a return on investment, Zuckerberg gave an evasive answer, calling it a technical question and stressing that the company's priority is building leading models and scaling products to billions of users.

Analysts voice doubts

Some analysts are openly questioning whether the scale of spending is being reflected in revenue. Melissa Otto of Visible Alpha noted that the question of real returns on such enormous capital expenditures is becoming increasingly hard to ignore.

It raises the question of what the real return is on all this capital expenditure they're spending - Melissa Otto, analyst at Visible Alpha

The market reaction was sharp: Meta shares fell more than 9 percent in after-hours trading, from $585.61 to around $529. That contrasts with the reaction to results from Alphabet and Amazon, which also raised their AI spending forecasts around the same time but saw milder stock reactions.

What it means for the market

Meta remains one of the companies betting most heavily on AI infrastructure, alongside Alphabet, Microsoft and Amazon. Combined spending by big tech companies on data centers and AI chips is growing faster than their profits, increasingly worrying investors who are asking when these investments will actually start paying off in financial results rather than just in executive statements.

For readers in Poland, the most relevant takeaway is that the pace and direction of spending by American tech giants directly affects cloud service prices, the availability of computing power, and the pace of development of AI tools used by Polish companies and developers as well.