In a move that has sent shockwaves through global tech stock markets, Meta Platforms, the parent company of major social media platforms Facebook, Instagram and WhatsApp, has seen its shares drop by 11% in Wednesday trading. The sell-off came directly after the firm released its second-quarter financial results, which laid out a sharp increase in planned artificial intelligence (AI) capital expenditure alongside declining quarterly profits.
The April-to-June results showed Meta delivered 28% year-over-year revenue growth, hitting $61 billion (£45.6 billion). However, net profits for the quarter fell 14% year-over-year to $6 billion, a decline that caught many market analysts off guard. Most notably, the company revised its full-year 2024 capital expenditure guidance upward to a range of $130 billion to $145 billion, a $5 billion increase from the forecast it released just three months prior. The vast majority of this expanded budget will be directed toward AI research, infrastructure, and product development, cementing Meta CEO Mark Zuckerberg’s position as one of the biggest corporate spenders on AI globally.
Zuckerberg has framed the aggressive spending push as a high-stakes, long-term bet that will pay off for the company and its investors over time. “I get that this is a big bet across the industry,” Zuckerberg told analysts during a post-results earnings call. “My personal bet is that the people who invest in this will feel very good and be rewarded over time.” The Meta chief added that existing AI investments are already driving higher user engagement on Facebook and Instagram, while also streamlining ad creation tools for small and medium-sized businesses. Looking ahead, he positioned autonomous AI agents as the next major product wave for the company, noting that soon these tools will be able to work around the clock on behalf of users.
Beyond consumer-facing products, Meta is preparing to launch a new line of business selling AI technology and infrastructure to other companies. The first step of this rollout will be simplifying integration for Meta’s existing Muse Spark AI model, with additional coding and productivity tools planned for future release. Meta CFO Susan Li told analysts that monetizing these enterprise AI offerings will be key to generating returns on the company’s massive capital outlay. “By 2028, we’ll have turned over a lot of cards,” Li said, referencing the timeline for the new business segment to mature. Zuckerberg added that while building an enterprise AI business requires new capabilities the company has not historically prioritized, the market opportunity is too large to ignore. “It’s not just about selling compute; it’s the API services and the productivity services and I think there is a very, very large opportunity there and we’re quite focused on that,” he said.
Despite the leadership’s optimistic long-term outlook, investors have reacted with immediate concern to the rising spending and shrinking near-term profitability. Meta’s quarterly free cash flow – the capital the company retains after covering operating expenses – fell to just $784 million, the lowest reading the firm has posted in at least five years, according to its official financial filings. Meta is not alone in this trend: Alphabet, Google’s parent company, posted its own record-low free cash flow last week, which also triggered a notable drop in its share price. For the moment, Zuckerberg’s big AI bet has split market sentiment: while the CEO and his team insist the investments will unlock massive value down the line, investors have made clear they are uneasy about the short-term hit to earnings and the unproven nature of Meta’s upcoming enterprise AI business.