Meta is betting the company on AI by hoarding its compute to build its own tools rather than renting it out, so its free cash flow collapsed from $12 billion to $784 million in a quarter, it suspended capex guidance, and investors punished the stock 10% — while Microsoft, by simply keeping capex steady, got its best day since 2008.
Meta's quarterly free cash flow fell ~90% to $784M because Zuckerberg is hoarding compute for unnamed internal AI tools, and the CFO says Meta is 'demand constrained' even as the company triples down. Wall Street analysts were begging Zuckerberg to lease out the compute for revenue. Contrast with Microsoft, which affirmed 2027 positive free cash flow and extended data center life to 25 years — and got its best day since 2008. The tension: Meta may win via its 3 billion users, but the market no longer believes in its ability to build AI products. ✦ AI generated
Josh Brown · The Compound · 2026-07-31 · original ↗
starts at this moment · 52:38
“Did you hear him answer the question about why he doesn't own any stock? ... I still don't like his answer.”
On the other end of the spectrum, Mark Zuckerberg said, 'I want to spend some time today laying out exactly how our investments are delivering results today and the opportunities that we see over time,' and investors are like, yeah, no, down 10%. So, Daniel, throw up chart five. This looks This looks like I fat finger something, like I hit a zero by accident. We're looking at Meta's free cash flow by quarter and it went from 12 billion a quarter ago literally to $784 million. It's down like 90%. One of the sellside analysts that I follow said somebody said if if Meta would have just said we are now officially renting out some of this compute capacity that we have people would have said okay here's the revenue instead Meta tripled down no we're saving that compute because for ourselves because we're building our own tools which you will see soon the problem is now they don't have the revenue from rent and compute and they also don't have the tools cuz nobody really understands what they're building and for who and why. It's this vague thing like they're going to build AI for business. Okay, like it's not here and uh you're still spending and there's no offsetting growth in revenue in the way that we get from AWS, from Azure, from Google. I just read the notes on the call. It seemed like analysts were practically begging Zuckerberg to like lease out the compute that they bought because that would have been revenue and then they could say, 'Okay, this company spent a ton of money on compute, but now there's money coming in from it.'
verbatim transcript · starts at 52:38
52:38exactly how our investments are delivering results today and the opportunities that we see over time, and investors are like, yeah, no, down 10%." So, Daniel, throw up chart five. This looks This looks like I fat finger something, like I hit a zero by accident. We're looking at Meta's free cash flow by quarter and it went from 12 billion a quarter ago literally to $784 million. It's down like 90%. One of the
53:04sellside analysts that I follow said somebody said if if Meta would have just said we are now officially renting out some of this compute capacity that we have people would have said okay here's the revenue instead Meta tripled down no we're saving that compute because for ourselves because we're building our own tools which you will see soon the problem is now they don't have the revenue from rent and compute and they also
53:36don't have the tools cuz nobody really understands what they're building and for who and why. It's this vague thing like they're going to build AI for business. Okay, like it's not here and uh you're still spending and there's no offsetting growth in revenue in the way that we get from AWS, from Azure, from Google. >> They're building agents for everyone. They're both simultaneously going to be renting excess compute and then saying
54:00on the same conference call, Susan uh the CFO said, "We are today and expect to be in the sort of foreseeable future demand constrained." That really includes our core business too where we still have numerous ROI positive places that we would put compute toward if we had it. So like there's so many things going on that just don't add up. >> Yeah. I mean not not a shock that the
54:19stock had crushed today. Um >> it did the opposite of Microsoft. >> Yes. >> Oh, and they suspended their capex guidance, >> right? So Okay. Okay. So, so Meta is an interesting one. I mean, first of all, they haven't shown any progress on the AI front at all. I mean, a little bit. >> No, no, you're right. The revenue is 98% advertising. >> Yeah, >> there's nothing else.
54:39>> Zero. I mean, they don't have a product. I mean, they might have some products like they have the glasses, but like when you think about like the suite of products that we talk about are AI products, Claude, open Chad GPT, >> Gemini, >> Gemini. >> Yeah. >> Meta is not in the conversation. >> No. >> So, so okay. So now now he's going to go out and spend. I think it's it was
54:58interesting to hear that the Wall Street so doesn't believe after seeing the the sort of what Meta has put out. Wall Street so doesn't believe in their capability to build anything in AI that like I just read the notes on the call. It seemed like analysts were practically begging Zuckerberg to like lease out the compute that they bought >> because that would have been revenue and then they could say,
55:19>> "Okay, this company spent a ton of money on compute, but >> now there's money coming in from it." >> So, here's here's a question for you, Josh, because I think you rightly pointed out on halftime report that one of the reasons why Microsoft did so well was because they didn't increase their their capex. >> They raised the floor, not the ceiling, >> right? Meta did the same thing.