Meta’s financial metrics have taken a notable punch due to its AI spending. In the company’s earnings report on Wednesday, Meta executives shared that free cash flow for the past quarter was down to only $784 million, a major drop compared to the $8.55 billion number for the same time period last year. Revenue for the entire fiscal year is also looking likely to come below market expectations. Meta is the second AI hyperscaler in a week to receive investor wrath for struggling free cash flow. Last week, Google reported negative free cash flow due to the money it was pouring into AI, a first in company history. The tech giants claim the combined trillions of dollars they are pouring into AI is warranted to address a surge in demand. But experts have been growing weary of these promises, fearing that the investment is potentially overestimating how fast that demand will materialize, a scenario that, if true, could point to a potential AI bubble.
Analysts had been expecting bad news on the free cash flow front for some time now, considering the eye-watering financial commitments the AI hyperscalers have been announcing in the past two rounds of big tech earnings. Google validated some of those fears last week, and Meta made matters worse on Wednesday.
