Meta shares dropped nearly 10% during after-hours trading Wednesday after the company delivered a disappointing revenue projection and saw its cash pile dwindle. The headline problem was simple: the company made less profit per share than investors had hoped for. Earnings per share came in at $6.18, while analysts polled by LSEG had expected $7.22.
Revenue actually squeaked past expectations. Meta brought in $60.80 billion for the quarter, above the $60.17 billion forecast.
But that good news got drowned out by what Meta said about the next few months. Meta projected revenue for the current quarter in the range of $61 billion to $64 billion, with a midpoint of $62.5 billion. Analysts had forecast $63.15 billion, per LSEG. The company said the guidance "assumes foreign currency is an approximately 1% headwind to year-over-year total revenue growth, based on current exchange rates."
The number of daily active users across Meta's apps came in at 3.6 billion, slightly below the 3.61 billion that analysts had predicted, as reported by StreetAccount. The metric counts unique individuals using any of Meta's family of applications.
The real shock came in another number. Free cash flow, which represents cash remaining after covering expenses and large investments, plummeted to $784 million in the latest quarter, down from $8.55 billion a year earlier. That tells you where Meta's money is going.
Meta is spending heavily on artificial intelligence infrastructure. Total costs and expenses reached $42.03 billion for the quarter, up 55% compared with the same period last year. Some of that came from unusual items.
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Meta recorded $2.4 billion in charges tied to legal matters. Severance expenses in connection with layoffs that began in May added another $1.18 billion.
Meta tightened its capital expenditure forecast for the year to $130 billion-$145 billion, compared with an earlier estimate of $125 billion-$145 billion. The firm is constructing a massive Hyperion data center facility in rural Louisiana with a projected cost exceeding $50 billion. Meta revealed plans for a $9 billion data facility in Alberta, Canada, earlier this July. On Tuesday, Meta teamed up with BlackRock on a $14 billion data center development in El Paso, Texas.
Meta's Reality Labs division posted $4.6 billion in operating losses for the second quarter, with revenue of $431 million.
The company's net income declined to $15.85 billion, down from $18.34 billion a year ago, which equated to $7.14 per share.
The big question is whether all this spending will pay off. Meta CEO Mark Zuckerberg said on the earnings call, "Overall, we expect that a significant portion of our compute is going to go towards training our models, growing our core business, and delivering personal agents and new products. But we also expect to grow a large business serving large customers as well."
Zuckerberg also said, "We're getting a lot of offers for compute at a significant premium over what we paid for it." That suggests Meta might lease out extra data center capacity, turning its huge AI spending into a new revenue stream.
Meta rolled out the Muse Spark 1.1 model in July. AI chief Alexandr Wang described it as "the strongest model for agentic and coding work yet" and noted its price is lower than that of similar models from OpenAI and Anthropic. Meta has been pouring resources into its AI strategy since bringing Wang on board in June 2025, a move that included a $14.3 billion investment in his company, Scale AI.
CFO Susan Li noted on the call that after removing the $2.4 billion legal charges and $1.18 billion severance costs, operating income rose 9% from a year ago.
Meta stock has dropped 11% year-to-date as of Wednesday's close, compared with a roughly 5% gain for the Nasdaq. The sharp decline in free cash flow underscores the near-term financial strain of Meta's massive AI infrastructure bets, even as the company positions itself for long-term competitive advantage in artificial intelligence.
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