Meta has reported a sharp drop in quarterly profit despite growing advertising revenue. The financial report pairs a 28% increase in overall revenue with a massive wave of artificial intelligence infrastructure spending. But the heavy capital investments have caused free cash flow to plunge by 91%.
Advertising revenue from Facebook and Instagram grew by 28% to help push overall revenue to $60.8 billion. However, this growth did not lead to higher profits. Net income fell by 14% to $15.8 billion. Earnings per share landed at $6.18, missing the $7.22 target expected by analysts on Wall Street. IT managers and investors are questioning whether the heavy spending will pay off.
The drop in profit stems directly from infrastructure spending. Meta directed over 50% of its quarterly revenue into building data centers and purchasing artificial intelligence chips from Nvidia. Capital expenditure reached $31.08 billion for the quarter. This aggressive spending left the company with a free cash flow of $784 million, down from the $8.55 billion recorded during the same period last year.
Despite the pressure on cash reserves, leadership plans to maintain this investment pace. The company adjusted its capital expenditure forecast for the year to a range between $130 billion and $145 billion, raising the minimum projection by $5 billion. Chief Executive Officer Mark Zuckerberg defended the strategy, stating that AI is accelerating the core business. He added that the results are already starting to show.
Chief Financial Officer Susan Li pointed out that other costs also dragged down the quarterly results. The company faced $2.4 billion in legal costs and $1.18 billion in severance packages from layoffs. Still, the company is pushing forward with massive projects. Recent infrastructure deals include a $14 billion data center in Texas built in partnership with BlackRock. Meta also expanded its investment in a Louisiana facility known as Hyperion, pushing the total budget there to $50 billion, alongside a separate $9 billion data center project in Canada.
