Meta Platforms shares fell about 9 percent after Wednesday's earnings report as the company disclosed its lowest quarterly free cash flow in at least five years, raised its 2026 capital-spending target for the second time in three months, and delivered current-quarter revenue guidance below Wall Street forecasts.

Free cash flow for the April-to-June quarter plunged 91 percent from a year earlier to $784 million as spending on artificial-intelligence data centers consumed nearly every dollar Meta took in. The company now expects to spend $130 billion to $145 billion in 2026, up from the $125 billion range it named three months ago. Guidance for revenue this quarter of $61 billion to $64 billion, or $62.5 billion at the midpoint, fell short of the $63.15 billion analysts had modeled, according to LSEG.

What shifted

The selloff arrived one week after Alphabet raised its own 2026 capex ceiling to $205 billion and turned free cash flow negative for the first time in more than a decade. Microsoft cut against the pattern the same day, with shares up about 9 percent after quarterly revenue climbed 18 percent to $90 billion and profits jumped 31 percent to $35.8 billion, giving Wall Street a template for AI spending that investors are still willing to fund. That contrast is the subject of a separate report in today's edition.

Meta's core advertising revenue grew 28 percent from a year earlier to $61 billion, and profits fell 14 percent to $6 billion. Digital ads still account for 98 percent of company revenue. Reality Labs, the virtual-reality unit that survives from the metaverse strategy chief executive Mark Zuckerberg unveiled in 2021, lost $4.62 billion in the quarter on $431 million of revenue.

The pitch

Zuckerberg spent much of the analyst call defending the buildout and previewing a way to earn some of it back. He said Meta is "getting a lot of offers for compute at a significant premium" over what it paid, and floated the idea of leasing excess capacity to third parties, a business Meta has never run and one that would make it the last of the four U.S. hyperscalers to enter the cloud market. He offered no timeline, pricing or first customers.

"It's not just about selling compute; it's the API services and the productivity services and I think there is a very, very large opportunity there and we're quite focused on that," Zuckerberg said.

He also promised that Meta will soon put personal AI agents in front of its more than 2 billion daily Instagram users. "Soon, we'll have agents that can work 24/7 on your behalf," Zuckerberg said. Chief financial officer Susan Li told analysts the enterprise push will take time to pay off. "By 2028, we'll have turned over a lot of cards," she said. Meta also confirmed that Dave Brown, a former longtime senior executive at Amazon Web Services, is joining the company.

The bear case

Mike Proulx, an analyst at Forrester, said Meta's cash generation "almost all got eaten by AI infrastructure spending" in the quarter and drew a comparison Zuckerberg has spent three years trying to escape. "There's a bit of similarity to Meta's metaverse missteps in that Meta is once again spending ahead of proven product demand," Proulx said. Ben Barringer, head of technology research at Quilter Cheviot, wrote that "the narrative from Mark Zuckerberg is a little light on detail and relying on what could be done in the future."

The analysts quoted in Wednesday's centrist wire coverage of the call were uniformly skeptical; Zuckerberg's own forward pitch stood as the company's only defense on the record. Meta shares are down about 16 percent for the year.

What's next

Amazon reports quarterly results Thursday, the last of the four hyperscalers to face investors on capex this week. Meta has said it will share more details "soon" on both its personal-agent product and any cloud offering.