NEW YORK, July 30, 2026, 07:00 EDT – Meta’s stock declined 9% as the company reported that artificial intelligence development had absorbed 98% of its operating cash flow.
- Meta stock was set at $533.49, a decline of 8.9%, ahead of Thursday’s Nasdaq opening.
- Revenue increased by 28% in the second quarter, while free cash flow dropped 91% to $784 million.
- Meta allocated 97.5% of its operating cash flow to capital expenditures and lease obligations. The company did not buy back any shares in the quarter.
Shares of Meta Platforms, Inc. NASDAQ:META slipped 8.9% in premarket trade on Thursday, quoted at $533.49 after finishing Wednesday at $585.61. The Nasdaq had yet to open for regular trading.
The selloff was driven by concerns over cash flows rather than a drop in advertising demand. Meta generated $31.86 billion in operating cash during the second quarter, while capital expenditures and finance-lease payments totaled $31.08 billion.
That expenditure took up 97.5% of the operating cash flow, based on figures from the company. Free cash flow represented only 1.3% of revenue, compared with an 18.0% margin a year before.
This is significant as advertising accounted for 97.6% of Meta’s revenue. The company’s spending matches that of cloud platforms, yet it does not have a proven cloud business.
| Q2 measure | 2026 | 2025 | Change |
|---|---|---|---|
| Revenue | $60.80 bln | $47.52 bln | +28.0% |
| Advertising revenue | $59.36 bln | $46.56 bln | +27.5% |
| Costs and expenses | $42.03 bln | $27.08 bln | +55.2% |
| Operating income | $18.78 bln | $20.44 bln | -8.2% |
| Operating margin | 31% | 43% | -12 points |
| Operating cash flow | $31.86 bln | $25.56 bln | +24.7% |
| Capex and lease principal | $31.08 bln | $17.01 bln | +82.7% |
| Free cash flow | $0.78 bln | $8.55 bln | -90.8% |
| Share repurchases | $0 | $10.17 bln | -100% |
| Net debt issuance | $24.91 bln | $0 | Not meaningful |
Expenses increased at nearly double the pace of revenue. This total included $2.40 billion in legal-related charges and $1.18 billion in severance costs. Chief Financial Officer Susan Li noted that operating income would have climbed 9% if these costs were excluded. Reported operating income declined 8%.
The core advertising business stayed robust, with ad impressions up 14% and average pricing climbing 12%. The number of daily active users on Meta’s apps grew by 3%, reaching 3.60 billion.
Revenue surpassed the initial FactSet consensus by $581 million, but earnings fell short by $1.01 per share. Meta’s midpoint revenue guidance for the third quarter likewise came in around $640 million below the preliminary consensus.
| Result or outlook | Meta figure | Preliminary consensus | Difference |
|---|---|---|---|
| Q2 revenue | $60.80 bln | $60.22 bln | Up 1.0% |
| Q2 diluted EPS | $6.18 | $7.19 | Down 14.0% |
| Q3 revenue | $61–$64 bln | $63.14 bln | Midpoint off by 1.0% |
Meta increased the lower bound of its 2026 capital expenditure outlook, moving the range to $130 billion–$145 billion. The midpoint is up 10% from January and sits roughly 90% higher than Meta’s 2025 capital spend.
The change in capital allocation is evident. Meta posted $24.91 billion in net debt for the quarter. It made no share buybacks, after repurchasing $10.17 billion in the prior year.
Microsoft Corp. NASDAQ:MSFT stands out for comparison. The company generated $19.6 billion in free cash flow last quarter, even with significant infrastructure investment. Azure revenue increased by 43%, directly enabling the monetisation of that added capacity.
Alphabet Inc. NASDAQ:GOOGL represents the opposite end of the spectrum. In the June quarter, its capital expenditures were higher than its operating cash flow, resulting in negative free cash flow of $5.86 billion.
| Latest June quarter | Operating cash flow | Cash purchases of property and equipment | Cash investment/OCF | Reported free cash flow |
|---|---|---|---|---|
| Meta | $31.86 bln | $30.12 bln | 94.5% | $0.78 bln |
| Microsoft | $55.40 bln | $35.80 bln | 64.6% | $19.60 bln |
| Alphabet | $39.07 bln | $44.92 bln | 115.0% | -$5.86 bln |
Meta’s stated free cash flow subtracts $962 million in finance-lease principal. Company definitions may vary.
“Meta is spending like a hyperscaler without a hyperscaler’s business model,” said eToro analyst Josh Gilbert. The key distinction is that Microsoft and Alphabet are able to offer computing power via their mature cloud services. Reuters
Chief Executive Mark Zuckerberg stated that “AI is accelerating our core business today.” He additionally described developments in personal agents, enterprise services and potential compute sales. However, investors were given limited concrete revenue targets for those areas. SEC
Another challenge arises from potential legal risks. Meta has cautioned that upcoming youth-focused court cases could result in significant losses. Four states in the U.S. are pursuing $1.4 trillion in damages, citing alleged negative effects on young users. Meta denies these claims.
The criteria for investors have shifted. Growth in advertising is now insufficient by itself. Meta is required to improve cash conversion and demonstrate that its infrastructure is capable of producing income from sources other than advertising.
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