Meta Platforms (NASDAQ: META) delivered another quarter of strong revenue growth, but investors were less than thrilled with other numbers. The company reported second-quarter revenue of $60.8 billion, a 28% increase from a year ago and slightly above Wall Street’s expectations. Advertising remained the company’s biggest business, helping drive another quarter of impressive sales growth.
But despite the strong top line, profits fell.
Meta earned $15.8 billion during the quarter, down 14% from a year ago. Earnings per share also missed analysts’ estimates, sending the stock lower after the results were released.
The reason wasn’t weaker demand. It was spending.
CEO Mark Zuckerberg is investing heavily in artificial intelligence, betting that today’s massive costs will create tomorrow’s biggest opportunities. For investors, the question is simple: How long will they have to wait for that payoff?
The company now expects capital spending to reach between $130 billion and $145 billion this year as it builds more data centers, buys advanced AI chips, and expands the computing power needed to train and run its AI models. That’s a substantial increase from last year and one of the largest investment programs in corporate America.
Those investments are putting pressure on profits.
Operating expenses jumped sharply during the quarter, and Meta’s operating margin fell to 31% from 43% a year ago. Free cash flow also dropped dramatically because so much cash is being used to fund AI infrastructure.
For many investors, that was the biggest takeaway from the earnings report.
The Advertising Business Is Still Strong
The good news for Meta is that its core business continues to perform well.
Advertising revenue grew as businesses continued to spend to reach customers across Facebook, Instagram, and the company’s other apps. Daily users across the company’s family of apps also continued to grow, reaching about 3.6 billion people. Instagram now has roughly 2 billion daily users, while Threads has grown to around 500 million monthly users.
Those numbers show that Meta’s platforms remain some of the most valuable advertising properties in the world.
Zuckerberg Is Betting Big on AI
Artificial intelligence has become the company’s biggest strategic priority.
Meta is building AI assistants that can answer questions, create content, and help users across Facebook, Instagram, Messenger, and WhatsApp. The company is also investing in AI-powered advertising tools that help businesses create ads more quickly and target customers more effectively. Beyond software, the company continues developing AI-powered smart glasses and other wearable devices that could become an important new business over time.
Zuckerberg has repeatedly said he believes AI will become a core part of everyday life, much like smartphones did over the past two decades. If he’s right, Meta hopes to be one of the companies leading that transformation.
Wall Street generally agrees that AI will play a major role.
Right now, Meta is spending faster than many investors expected. While revenue continues growing at an impressive pace, margins are shrinking and free cash flow has fallen sharply.
That’s why the stock came under pressure after earnings. Investors weren’t questioning whether the company has a strong business today. They were asking whether the company is spending too much before the financial benefits of AI become clear.
However, if the company succeeds in turning AI into another major source of growth, today’s spending could eventually look like a smart long-term investment.
For investors, the debate isn’t whether Meta has a great business. It’s whether the company’s massive AI spending will eventually generate enough growth to justify the cost. That question is likely to remain at the center of the investment story for many quarters to come.