Meta, the parent company of Facebook and Instagram, reported second-quarter revenue growth but fell short of market expectations for profits and third-quarter forecasts. The company's significant investments in artificial intelligence (AI) infrastructure have led to a more than 90% decline in usable free cash flow.
On July 29, Meta announced that its second-quarter revenue reached $60.8 billion, a 28% increase from the same period last year, surpassing market expectations of $60.17 billion.
However, expenses grew at a faster rate than revenue. Total costs for the second quarter amounted to $42.03 billion, a 55% increase year-over-year, which included $2.4 billion in litigation costs and $1.18 billion in severance costs related to restructuring.
As a result, operating income decreased by 8% to $18.78 billion, and net income fell by 14% to $15.85 billion. Earnings per share (EPS) were $6.18, significantly below the market estimate of $7.22.
The core advertising business continued to grow, with ad revenue reaching $59.36 billion, a 27% increase from the previous year.
Looking ahead, Meta's third-quarter revenue forecast also fell short of market expectations. The company anticipates revenue between $61 billion and $64 billion, with a midpoint of $62.5 billion, lower than the market estimate of $63.15 billion.
Investment in AI infrastructure has also increased. Meta's capital expenditures (CapEx) for data centers and servers in the second quarter reached $31.08 billion. Consequently, free cash flow (FCF), which is the cash generated from operations minus investment costs, plummeted 91% from $8.55 billion last year to $784 million.
Meta has also adjusted its capital expenditure outlook for the year, raising the lower end of its forecast from $125 billion to $130 billion, while keeping the upper end at $145 billion.
Mark Zuckerberg, Meta's CEO, stated, "AI is currently accelerating growth in our core business, powering next-generation products, and opening new business opportunities."
Following the earnings report, Meta's stock fell 1.31% during regular trading and dropped an additional 6% in after-hours trading.
* This article has been translated by AI.
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