--- title: "The massive investment in AI raises concerns as Meta (META.US) sees a 94% drop in free cash flow, yet some Wall Street institutions remain optimistic about its long-term prospects" type: "News" locale: "en" url: "https://longbridge.com/en/news/294391806.md" description: "Meta's massive investment in AI has led to a 94% drop in free cash flow, with its stock price falling over 9%. Although some Wall Street institutions like Evercore remain optimistic about its long-term prospects, the market is concerned that sustained high capital expenditures and resource dilution will squeeze profits, and that the commercialization of AI is not expected until 2027" datetime: "2026-07-30T16:08:56.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294391806.md) - [en](https://longbridge.com/en/news/294391806.md) - [zh-HK](https://longbridge.com/zh-HK/news/294391806.md) --- # The massive investment in AI raises concerns as Meta (META.US) sees a 94% drop in free cash flow, yet some Wall Street institutions remain optimistic about its long-term prospects According to the Zhitong Finance APP, Meta Platforms (META.US) latest quarterly performance highlights the high costs brought about by the artificial intelligence (AI) competition. Due to rising capital expenditures, significant pressure on free cash flow and profitability, and the management's failure to provide clear expectations for the imminent returns on AI investments, the company's stock price has faced a sell-off. As of the time of writing, the stock has dropped over 9%, trading at $532.7. Meta stated that with the lower limit of capital expenditure guidance raised by an additional $5 billion, AI investments will continue to weigh on free cash flow and profitability. Data shows that the company's free cash flow for this quarter was only $784 million, a sharp decline of about 94% from $12.4 billion in the previous quarter, becoming a focal point of market attention. Wedbush analyst Ygal Arounian mentioned during the Meta earnings call that while the company is advancing several strategic layouts expected to enhance AI commercialization capabilities, it is still in a very early stage, and there is a long way to go before achieving large-scale monetization. Meta CEO Mark Zuckerberg stated that the additional computing power the company possesses is worth more than its construction costs, but the real opportunities to monetize this computing power are not expected to materialize until 2027. However, Wall Street does not fully agree, as investors are concerned that free cash flow will continue to be squeezed in the context of ongoing investments of hundreds of billions of dollars in AI over the next few years. In addition to the pressure on profitability, Meta's continuously expanding AI strategy has also raised market concerns about resource allocation. Currently, the company is simultaneously advancing multiple projects, including artificial intelligence, large models, smart glasses, self-developed chips, AI business agents, and data center construction. Some analysts believe this may lead to the management and R&D team's resources being too dispersed. Needham analyst Laura Martin stated that Meta is currently "fighting too many battles at once," with different businesses corresponding to different products, customers, sales systems, and competitive advantages. She believes that the company's continuous expansion into new businesses, rather than concentrating resources on developing the core business with the highest return rates, reduces the probability of Meta successfully achieving its various objectives. However, many Wall Street institutions remain optimistic about Meta's long-term prospects. Evercore analyst Mark Mahaney reiterated his "outperform" rating on Meta, believing that the current stock price is attractive. He stated that the market's current focus is no longer on Meta's core advertising business, but rather on whether the company can leverage AI to create new products, services, and commercialization models. He believes that the probability of achieving this goal is higher than the market expectations reflected in the current approximately 16 times price-to-earnings ratio, and the low valuation is mainly due to the management's failure to provide a sufficiently clear roadmap for AI commercialization during the earnings call. Mahaney pointed out that Meta's core business remains strong, but due to the massive scale of this round of AI investments, the market hopes to see more substantial evidence of AI monetization beyond the advertising business, which this earnings report did not provide Morgan Stanley analyst Brian Nowak also maintains an "Overweight" rating on Meta. He pointed out that the daily active users of Meta's apps have reached 3.6 billion, and Instagram's daily active users have also surpassed 2 billion, with the core business still possessing strong user scale, user stickiness, and a commercial moat. As Meta utilizes large language models for deeper analysis of massive data, its advertising efficiency and monetization capabilities are expected to further improve, continuously providing ample cash flow support for AI investments. Citi Research also maintains a "Buy" rating on Meta. Analyst Ronald Josey stated that although the second-quarter revenue and third-quarter performance guidance are generally in line with market expectations, the company continues to increase AI investments, which is expected to generate more commercialization tools in the future. He also acknowledged that rising capital expenditures, the time to realize returns on AI investments, and profitability will remain focal points of market debate. Overall, despite increased capital expenditures, rising legal fees and layoff costs, and market concerns over pressured free cash flow, mainstream Wall Street institutions generally maintain "Buy," "Outperform," or "Overweight" ratings on Meta ### Related Stocks - [META.US](https://longbridge.com/en/quote/META.US.md) - [FBL.US](https://longbridge.com/en/quote/FBL.US.md) - [METD.US](https://longbridge.com/en/quote/METD.US.md) - [METU.US](https://longbridge.com/en/quote/METU.US.md) - [METW.US](https://longbridge.com/en/quote/METW.US.md) - [FBY.US](https://longbridge.com/en/quote/FBY.US.md) - [FBYY.US](https://longbridge.com/en/quote/FBYY.US.md) - [MAGX.US](https://longbridge.com/en/quote/MAGX.US.md) - [EVR.US](https://longbridge.com/en/quote/EVR.US.md) - [MS.US](https://longbridge.com/en/quote/MS.US.md) - [C.US](https://longbridge.com/en/quote/C.US.md) - [MS-O.US](https://longbridge.com/en/quote/MS-O.US.md) - [MS-Q.US](https://longbridge.com/en/quote/MS-Q.US.md) - [MS-E.US](https://longbridge.com/en/quote/MS-E.US.md) - [MS-I.US](https://longbridge.com/en/quote/MS-I.US.md) - [MS-L.US](https://longbridge.com/en/quote/MS-L.US.md) - [MS-P.US](https://longbridge.com/en/quote/MS-P.US.md) - [MS-A.US](https://longbridge.com/en/quote/MS-A.US.md) - [MS-F.US](https://longbridge.com/en/quote/MS-F.US.md) - [MS-K.US](https://longbridge.com/en/quote/MS-K.US.md) - [C-R.US](https://longbridge.com/en/quote/C-R.US.md) ## Related News & Research - [BUZZ-Street View: Meta's AI push to weigh on free cash flow as investors seek returns](https://longbridge.com/en/news/294329489.md) - [Zuckerberg says Meta’s enterprise AI opportunity extends beyond agents](https://longbridge.com/en/news/294270303.md) - [Meta Platforms Q2 Preview: Key Items to Watch to Turn Stock Around After Earnings](https://longbridge.com/en/news/294099452.md) - [Meta adds new task automation features to AI assistant](https://longbridge.com/en/news/293782010.md) - [Threads users can now chat with Meta AI in their DMs](https://longbridge.com/en/news/293958737.md)