Meta Platforms saw its shares plunge in after-hours trading after investors reacted negatively to the company’s decision to ramp up spending on artificial intelligence, overshadowing another quarter of strong revenue growth.
Shares of the Facebook, Instagram and WhatsApp parent fell by as much as 11 per cent after the company reported its financial results for the April-to-June quarter.
Meta posted $61 billion in revenue for the quarter, representing a 28 per cent increase from a year earlier. However, net profit declined 14 per cent to $6 billion, while free cash flow fell sharply to $784 million, its lowest level in at least five years.
The company also raised its projected capital expenditure for the year to between $130 billion and $145 billion, up from the $125 billion forecast just three months ago, with the bulk of the investment earmarked for artificial intelligence infrastructure.
Chief Executive Officer Mark Zuckerberg defended the aggressive spending strategy, arguing that AI is already improving Meta’s core businesses and will create new revenue opportunities.
“Our AI investments are accelerating every part of our core business,” Zuckerberg said, adding that Meta plans to begin selling its AI technologies and computing tools to other businesses.
Chief Financial Officer Susan Li told analysts that commercialising Meta’s AI platforms would eventually generate returns on the company’s heavy investment.
“By 2028, we’ll have turned over a lot of cards,” she said.
Despite management’s optimism, investors remain concerned that Meta is spending billions of dollars before demonstrating meaningful financial returns from its AI initiatives.
Analysts noted that the company’s free cash flow was almost entirely consumed by AI infrastructure spending during the quarter.
“What it generated in cash this quarter almost all got eaten by AI infrastructure spending,” said Mike Proulx, an analyst at Forrester.
He added that investors must decide whether Meta’s growing portfolio of AI projects represents a smart diversification strategy or an expensive distraction.
Proulx also drew comparisons with Meta’s previous multibillion-dollar investment in the metaverse, which failed to achieve widespread commercial success.
Zuckerberg insisted the company’s long-term strategy remains sound, arguing that AI is already increasing user engagement on Facebook and Instagram while helping businesses create more effective advertising.
He also highlighted Meta’s work on AI agents, autonomous digital assistants capable of performing tasks on behalf of users.
“Soon, we’ll have agents that can work 24/7 on your behalf,” Zuckerberg said.
He added that Meta intends to build a significant enterprise business by selling AI models, application programming interfaces (APIs), productivity tools and computing services to corporate customers.
Meta’s disappointing market reaction contrasted sharply with Microsoft’s performance.
Microsoft’s shares rose about 5 per cent in after-hours trading after the software giant reported stronger financial results and reassured investors that its AI investments were already contributing to business growth.
The company recorded $90 billion in quarterly revenue, up 18 per cent, while net profit climbed 31 per cent to $35.8 billion.
Microsoft also announced plans to spend $175 billion on AI infrastructure over the next financial year, below the $190 billion invested during the year ended June.
The contrasting market reactions suggest investors remain willing to support massive AI spending, but only when companies can demonstrate clear financial returns and a credible path to monetising their investments.
