Meta shares dropped after the company posted second quarter results that beat on revenue but showed free cash flow nearly disappearing, and that combination has a lot of people asking whether Meta stock is a buy or sell right now. Revenue came in ahead of expectations, but the gap between a strong top line and a thin cash position is exactly what makes this Meta earnings report worth a closer look. Meta spent more on AI infrastructure than almost anyone predicted, and the stock price felt it right away.

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Meta Stock Price, Earnings Report, AI Spending And Cash Flow

Meta Stock Price Falls On Earnings Report Miss

Earnings per share landed at $6.18. That missed the $7.22 analysts polled by LSEG were expecting, a fairly wide gap for a company this size. Revenue reached $60.80 billion against a forecast of $60.17 billion, so the top line actually beat estimates. Guidance for the current quarter came in soft, somewhere between $61 billion and $64 billion. That works out to $62.5 billion at the midpoint, below the $63.15 billion Wall Street had modeled going in. Daily active people hit 3.6 billion, just a touch under the 3.61 billion estimate. The Meta earnings report also showed net income sliding to $15.85 billion from $18.34 billion a year earlier. Shares dropped as much as 7.45% right after the report.

That added to an 11% decline for the year, even as the Nasdaq climbed about 5% over the same stretch. The move put Meta stock buy or sell right back on investors’ minds. At the time of writing, that gap between Meta and the broader market is still wide. It remains one of the widest among big tech names. That is a big part of why the Meta stock price keeps drawing attention.

Mark Zuckerberg, CEO of Meta, said:

“We also expect to grow a large business serving large customers as well.”

Meta Free Cash Flow Drops As Meta AI Spending Surges

Operating cash flow actually held up fine, coming in at $31.9 billion. That was nearly flat with the $32.2 billion the company generated in the first quarter. So the core business kept chugging along much as it had before. What changed, and changed fast, was the spending. Capital expenditures hit $31.1 billion for the quarter, a jump of more than 50% from the prior quarter. Meta AI spending on data centers is the main reason costs climbed so much this time around. Subtract that from operating cash flow, and Meta free cash flow lands at just $784 million.

That is down from $8.55 billion a year ago, and down from $12.4 billion in the first quarter alone. Meta also narrowed its full year capital expenditure guidance to a range of $130 billion to $145 billion. That raised the low end by $5 billion for the second time this year. It tells you Meta AI spending is not slowing down anytime soon. Through June, the company had already spent an estimated $50.9 billion. That leaves a big chunk of the year’s budget still to go. It is easy to see why the Meta stock buy or sell conversation centers on cash flow. Revenue is not the issue right now.

Meta Stock: Buy Or Sell After The Cash Burn

So is Meta stock a buy or sell at the time of writing? It really comes down to how much patience an investor has for thin cash flow. Ad impressions rose 14% year over year and the average price per ad climbed 12%, both solid numbers that matter for anyone still sorting out Meta stock buy or sell, though revenue growth did decelerate from 33% in the first quarter to 28% in the second, which is worth noting even if 28% is still a healthy pace for a company this size. Meta closed the quarter with $90.3 billion in cash and marketable securities on the balance sheet, a cushion that is hard to ignore, and shares were trading at roughly 20 times earnings after the drop, below the S&P 500’s multiple of about 28.

Meta also struck a $14 billion data center venture with BlackRock in El Paso, Texas, on top of a Hyperion project in Louisiana that carries a price tag above $50 billion and a $9 billion build in Alberta, Canada, so the spending story is far from over and it keeps feeding the Meta stock buy or sell debate. Whether the Meta stock price looks cheap or expensive from here really depends on how long free cash flow stays this thin, and whether advertising keeps growing at a pace that can eventually justify all of it.

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For now, a Meta stock buy or sell decision is not a simple call either way. The Meta earnings report gave bulls plenty to point to on the advertising side, and it gave skeptics an easy target in the free cash flow line. Anyone weighing Meta stock buy or sell at this point is essentially betting that the advertising business can keep growing fast enough to make up for a spending spree that shows no sign of slowing down, and that is really what the whole Meta stock buy or sell question boils down to at the moment.