Meta has a massive timing mismatch: it is double-paying for infrastructure — renting compute from third parties while building its own data centers — without a clear path to monetization, and its improving monetization story has lost luster.

Meta Platforms Inc. said it has already committed almost $700 billion in future spending, through long- and short-term agreements, related to artificial intelligence data centers, cloud computing and more. Meta has $349.3 billion of non-cancelable contractual commitments, mostly related to third-party cloud deals, servers and network infrastructure, it said in a regulatory filing Thursday. That is a conservative estimate, because for agreements with variable terms, 'we do not estimate the total obligation beyond minimum quantities,' Meta said. The company also has $347 billion in commitments for leases that have not yet started, and so are not yet reflected on its balance sheet. That includes $68 billion added in July alone, with payments starting in 2027 and 2028. The costs are in addition to active leases and consist of data centers, colocations and 'certain network infrastructure.' What confused several investors on the call was why Meta was also renting compute from third parties; the issue the company faces is one of timing. Last summer Zuckerberg realized — correctly, in my opinion — that Meta risked falling out of the AI race, and not only spent heavily on AI talent, but also had to scramble to get more compute for training. The problem is that actually building data centers takes time — multiple years — which Meta didn't have; thus the renting. Ultimately, however, Meta wants to own its own data centers, not just for training but also for inference, which means they need to spend to build now for years from now. This timing mismatch is the biggest issue Meta has when it comes to investors. The company right now is basically double-paying for infrastructure without a clear path to monetization (i.e. no public cloud business) and, to make matters worse, its 'improving monetization' story lost a bit of its luster.

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