Meta’s revenue in Q2 was up 28% from a year earlier, beating expectations, but operating income at Family of Apps, the segment containing Facebook, Instagram, WhatsApp and Messenger, fell to $23.4 billion from $25.0 billion.So, its core business grew revenue, but made less money doing it.And the money that the company is earning is immediately being used—and most of it is not going to investors. The reason why is the term investors have come to love-to-hate: Capex. Capital expenditure now is up to $31.1 billion in the quarter, nearly double the amount spent the year earlier. Operating cash flow came to $31.9 billion; in other words, the company spent almost every dollar of cash its businesses could generate on AI infrastructure: servers, data centers, network infrastructure and chips.
Meta has always had to invest in the data centers that serve its popular social networking services to people all over the world. But the massive amount of computing power necessary to train and run AI models has supercharged the level of investment, upending the financial model in which Meta’s lucrative advertising business allowed it to stockpile cash. This new Meta, like its hyperscaler peers, must build multi-billion-dollar data centers at a non-stop pace, acquiring land, securing power, purchasing chips, running cooling systems and replacing machines that become obsolete within years (Depreciation and amortization in the second quarter rose 46% year over year to $6.4 billion in the quarter).
