Meta stock falls 9% after-hours as $145bn AI spending forecast eclipses record $60.8bn quarter

Meta shares dropped sharply in after-hours trading on Wednesday, falling more than 9% at one point, after the social media group published second-quarter results that were overshadowed by a dramatic increase in planned spending on artificial intelligence infrastructure and a plunge in free cash flow.

Revenue and profit

Revenue rose 28 percent to $60.8 billion, slightly above the $60.2 billion analysts had expected. That growth rate was down from 33 percent in the first quarter, and Meta cautioned that the third quarter would expand by only 19 to 25 percent. Net profit fell 14 percent to $15.8 billion, while adjusted earnings per share dropped 13 percent to $6.18, well below consensus. Research and development spending surged 67 percent to $21.7 billion, the largest single cost driver.

Cash flow from operations shrank 91 percent to just $784 million, alarming investors who watch the metric as a gauge of real cash generation. Meta also booked $2.4 billion in legal provisions linked to lawsuits alleging its platforms cause youth addiction and fail to protect minors from exploitation.

AI investment ramp

The company raised the lower end of its 2026 capital expenditure forecast from $125 billion to $130 billion, leaving the upper end at $145 billion. By comparison, Meta spent $72 billion on capital projects in 2025. Chief executive Mark Zuckerberg defended the spending, saying the company plans to invest aggressively to surpass rivals OpenAI, Google and Elon Musk's xAI in artificial intelligence.

AI initiatives are accelerating every part of the core business.

To help fund the build-out, Meta is bringing in outside capital. BlackRock is taking an 80 percent stake in a $14 billion data centre being built in Texas, and private-equity firm Blue Owl is investing in another site.

Legal headwinds and profit drag

The $2.4 billion charge for legal matters reflects an expanding docket of US court cases. In March a New Mexico court ordered Meta to pay $375 million over claims it did too little to shield young users from sexual exploitation and human trafficking. Shortly afterwards a Los Angeles court imposed a $4.2 million penalty in a case about social-media addiction risks. Meta is also fighting lawsuits that accuse it of deliberately designing addictive apps.

Outlook and market reaction

For the third quarter Meta guided revenue of $61 billion to $64 billion. The midpoint sits just below the $63 billion that analysts had pencilled in. With growth decelerating quarter by quarter and capital spending climbing steeply, the after-hours sell-off wiped out more than a tenth of the stock's value this year.

Zuckerberg called the period a "strong quarter" on the earnings call, yet the combination of weakening cash flow, rising legal costs and a capex runway that is nearly doubling year-on-year proved too much for investors who had been waiting for evidence that the AI bet would pay for itself.