Meta’s Profit Drops 14% as AI Capital Expenditures Soar to $130 Billion

Meta has significantly increased its investment in artificial intelligence, announcing a revised capital expenditure forecast for the year to a minimum of $130 billion, up from the previously projected $125 billion in April. Much of this investment is directed toward constructing advanced data centers to support its AI infrastructure.

In the second quarter, Meta reported a 28% increase in revenue to $60.8 billion compared to the same period last year, while costs and expenses rose 55% to $42 billion. This led to a profit of $18.3 billion, marking a 14% decline from the previous year.

CEO Mark Zuckerberg emphasized AI’s role in enhancing Meta’s core businesses, particularly digital advertising, stating that AI investments are accelerating all major areas of the company. He also highlighted “potentially selling compute directly” as a potential new revenue stream.

Investors responded negatively, with the stock dropping over 9% in after-hours trading following the earnings report. This comes amid broader industry trends, including Google’s recent announcement to increase capital expenditures, raising concerns about the sustainability of AI-related spending amidst market volatility.

Meta is exploring opportunities to monetize its computing power, with ongoing discussions with Anthropic for a potential deal worth up to $10 billion. Unlike competitors such as Google, Amazon, and Microsoft, Meta lacks a dedicated service for renting AI tools and computing resources.

David Wagner, head of equity at Aptus Capital Advisors, noted the uncertainty around AI spending trends, asking, “Who’s going to be the first company to blink?”

Despite challenges in transitioning to an AI-focused company, Meta has made progress with its AI models. The company recently launched Muse Spark, its most advanced model under AI chief Alexandr Wang, alongside Muse Image for generative visuals, with plans to introduce a video generator soon.

Muse Spark trails industry benchmarks in coding, reasoning, and writing capabilities. Meta aims to release a more powerful model, code-named Watermelon, this fall. The company continues to advocate for open-source AI development, countering tightly controlled approaches by firms like Anthropic and OpenAI.

Meta faced $2.4 billion in legal fees during Q2 amid ongoing litigation over claims its platforms are addictive. While losing a key early trial in March, it recently saw a reprieve when a plaintiff in one lawsuit withdrew.

The Reality Labs division, responsible for A.I. smart glasses, reported $431 million in revenue—a 16% year-over-year increase—though the segment still operates at a $4.6 billion annual loss, consistent with prior periods.

Meta’s apps portfolio expanded to 3.6 billion monthly active users, a 3% increase from the previous year.

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