I choose ②, but with one cavea

I choose ②, but with one caveat: Meta’s advertising cash flow is its biggest advantage, not a blank cheque for unlimited AI spending.

Meta generated $60.8 billion in Q2 revenue, up 28% year over year, yet free cash flow plunged to $784 million as capital expenditure reached $31.08 billion. That is the uncomfortable reality behind the AI boom.

Unlike heavily leveraged AI infrastructure providers, Meta has billions of users and an established advertising engine. AI can improve ad targeting, increase engagement and generate more revenue from its existing ecosystem.

However, spending up to $145 billion in 2026 raises the stakes. Revenue growth alone will not justify the investment if cash flow keeps deteriorating.

My view: Meta deserves a premium for monetizing AI, but not an unlimited premium for spending on it. The real winner will be the company that turns AI computing power into measurable earnings growth, not the one that buys the most GPUs.

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Comments

IreneWells
10-19 23:12
IreneWells
ROIC is the missing piece here. If capex stays this heavy into next year, AI needs to lift margin dollars, not just revenue.

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