Meta spent $30B on AI capex in Q2, nearly double. Ad revenue grew 28%. Operating margin fell to 31%. Zuckerberg eyes selling excess compute. Alpha Score 64.
Meta Platforms poured $30 billion into capital expenditures in the second quarter, nearly twice what it spent a year earlier. The company expects to lay out $130 billion to $145 billion for the full year, with the vast majority going to artificial intelligence.
Mark Zuckerberg told investors that other AI companies have reached out to buy access to Meta's compute capacity at a premium over the purchase price. The exact terms are unclear. The suggestion hints at a possible new revenue stream: an AI cloud business that resells excess data center capacity.
Advertising remains Meta's primary engine. Revenue from its ad business rose 28% in the second quarter to $61 billion, driven by improvements in targeting. That growth could not keep pace with the jump in AI-related spending. Operating margin fell to 31% from 43% a year ago. Operating earnings declined for the first time in recent quarters, to $87 billion over the trailing 12 months, according to the company.
Third-party estimates show Meta's AI chatbots hold only a sliver of market share, trailing Alphabet's Gemini and OpenAI's ChatGPT. If Meta cannot monetize its AI models directly, reselling compute power could generate billions, though it would pit Meta against entrenched hyperscalers like Amazon Web Services.
Depreciation from the massive capex buildup will begin flowing through the income statement in coming quarters, potentially squeezing earnings further. The stock trades at a price-to-earnings ratio of 22, a discount to many big tech peers. The earnings outlook is clouded by rising spending and an uncertain AI monetization path.
AlphaScala gives META a score of 64 out of 100, labeled Moderate. The stock closed at $589.85, down 0.86% on the session. For more on Meta's stock performance and score, visit the META stock page.
Reality Labs, Meta's wearables division, continues to lose billions each quarter.
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