This article first appeared on GuruFocus.
Meta Platforms (META, Financials), the social media and digital advertising company, reported a steep drop in second-quarter free cash flow as artificial intelligence infrastructure spending continued to ramp up.Free cash flow dropped to $784 million, from $8.5 billion a year ago, the company’s lowest level since the third quarter of 2022.Meta has boosted expenditure on data centers, smart glasses and the computational horsepower required to train advanced AI models and to fuel AI capabilities across Facebook, Instagram and its other platforms.The company also gave a sales projection for the third quarter that was worse than expected, adding to investor concerns over the pace at which those investments will begin to provide major returns.Meta’s results are a signal of a broader trend among big tech businesses willing to sacrifice short-term cash creation to build out AI infrastructure. The expenditure is also helping to boost demand for chips, networking devices and semiconductor production equipment.The fall in cash flow doesn’t necessarily imply weaker operating performance, but it does put pressure on management to deliver stronger revenue growth and better returns on AI investments.Investors will be eager to see signs of progress in Meta’s AI efforts and how these are impacting monetization, along with third-quarter revenue and capital expenditure.