The infrastructure behind Meta’s AI-powered advertising machine is swallowing almost every dollar of cash the company produces.
Meta said on its Wednesday earnings call that its free cash flow — the money left from operating cash after capital investments — plunged 91% from a year ago to $784 million in the second quarter of 2026. Its free cash flow exceeded $12 billion last quarter.
The collapse wasn’t because Meta’s business stopped delivering. Net cash from operating activities rose 25% year-over-year to $31.86 billion. Meanwhile, capital expenditures on servers, data centers, and networking — which all power Meta’s AI systems — surged 83% to $31.08 billion, nearly wiping out its free cash flow.
The company said that AI is improving how it recommends content and matches ads with users, helping advertising revenue climb 27%. In other words, parts of Meta’s AI investment already deliver returns.
The spending follows a period when Meta was seen as falling behind OpenAI and Google in the race to build leading models. CEO Mark Zuckerberg responded by overhauling its AI operation under Meta Superintelligence Labs in 2025.
In April, the lab released Muse Spark, a new model that powers Meta AI and can understand text, images, and other inputs. It has since released Muse Spark 1.1 and an image-generation model, Muse Image.
Meta is also spending on a more distant future: larger models, personal agents, business tools, and a possible enterprise computing business. The company expects capital expenditures of up to $145 billion this year.
“There is a lead time where we’re investing in building out these data centers now,” Zuckerberg said.
Meta is “not getting value out of them until they’re online,” he added.
Susan Li, Meta’s chief financial officer, said the company’s “strong operating cash flow” left it in a “position of strength” to fund the infrastructure buildout, even as little remained after capital spending.
Big Tech giants are collectively pouring over $700 billion into AI infrastructure this year. While Google’s free cash flow turned negative for the first time in decades earlier this month, Microsoft’s shares jumped after it held its spending plan steady on Wednesday.
Meta’s stock, meanwhile, fell nearly 10% in after-hours trading following its results.
Clearly, Wall Street is rewarding restraint.
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