Meta surged to $593.40 in pre‑market trading Thursday, a modest gain of 0.79% after a volatile week that saw the stock swing from a low of $580.12 to a high of $603.60.
Revenue beats but cash flow collapses
Despite the top‑line strength, free cash flow plummeted to $784 million, a 90.8% drop from the $8.5 billion generated in the same quarter a year earlier. Operating cash flow was $31.86 billion, but capital expenditures (capex) of $31.08 billion consumed 97.5% of that cash. Dividends of $1.353 billion exceeded the free cash flow by $569 million, meaning the dividend was funded largely from the balance sheet.
Capex acceleration and debt buildup
Meta’s capex guidance rose to $130 billion‑$145 billion for the full year, with the quarterly spend of $31.08 billion annualizing to about $124 billion. That amount exceeds the firm’s trailing twelve‑month EBITDA of $109.66 billion, indicating that the planned investment will outpace operating profit.
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Investors will be watching whether any of these compute investments generate measurable returns before 2027. The market currently prices the risk of continued high capex, which could keep the stock’s multiple depressed even if advertising revenue remains strong.
One cautious view is that Meta’s ability to translate its massive AI infrastructure spend into sustainable cash flow will hinge on how quickly new products like Muse Code gain traction.
Investors remain cautious.
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Shareholder returns and outlook
For the third quarter, Meta guided revenue to $61 billion‑$64 billion, with a midpoint of $62.5 billion falling $700 million short of consensus. The guidance suggests growth in the low‑to‑mid‑20s percent range, a slowdown from the 28% surge seen in the second quarter.
Because no additional catalysts are scheduled before the next earnings report on October 28, the stock’s near‑term movement will likely be driven by technical levels and investor sentiment rather than new fundamentals. The $580 support line, identified by Fibonacci retracement, remains a key floor, while the $603.60 high marks the current resistance.
Overall, Meta’s earnings story is a mix of strong advertising performance and a stark cash‑flow mismatch driven by unprecedented capex. The market has already priced in the heightened spending, leaving the firm’s ability to generate free cash flow and sustain its dividend as the primary questions heading into the next reporting period.
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