Meta's Free Cash Flow Fell to $784M as AI Capex Bites

Meta Grew 28% and Had $784 Million Left Over

Revenue topped $60 billion. Operating margin fell from 43% to 31%, net income dropped 14%, and free cash flow — normally around $12 billion a quarter — came in at $784 million, against $24.9 billion of newly issued debt.

Meta reported second-quarter results on 29 July with revenue of $60.8 billion, up 28% and ahead of the roughly $60.2 billion expected. Almost every other line went the other way. Total costs rose 55% to $42.0 billion, operating income fell 8% to $18.8 billion, net income fell 14%, and operating margin dropped from 43% to 31%. The shares fell about 7% after hours.

The line to read

Free cash flow was $784 million. Meta's recent quarterly norm is around $12 billion. In the same three months it paid $1.35 billion in dividends and issued $24.9 billion of new debt, taking long-term debt from $58.7 billion at the end of 2025 to $83.7 billion. Capital expenditure for the quarter alone was $31.1 billion.

Narrowed, not raised

Coverage described Meta raising its capex floor to $130 billion. Meta's own word is narrowed: the range went from $125–145 billion to $130–145 billion. The low end rose by $5 billion; the top was already set in April. It is also total capital expenditure including finance-lease principal, not a separate AI line — though the driver is not in doubt.

What management said about 2027

No 2027 capex figure was given. Finance chief Susan Li said planning is focused on maximising available capacity in 2026 and 2027 while retaining flexibility on server decisions for 2028, and signalled willingness to use more debt and strategic partnerships. Mark Zuckerberg floated selling intelligence rather than compute at a premium — the outline of a cloud business Meta does not currently have.

The one-offs

The quarter absorbed $2.40 billion in legal charges and $1.18 billion in severance. Headcount is 75,472, down 1% year over year, with most of a May reduction of about 8,000 people completing by the end of the third quarter.

Why It Matters

For a decade the advertising business paid for whatever Meta wanted to build. This is the quarter that stopped being true: revenue grew 28% and the company still had to borrow to fund the build-out. The capex number is the symptom; the cash flow line is the story.