Meta and Alphabet are ramping up AI infrastructure spending as advertising and cloud revenue grow, putting increasing pressure on free cash flow.
Meta and Alphabet are increasing AI spending as demand for artificial intelligence drives growth across advertising, cloud computing and new AI products.
But the infrastructure buildout is putting increasing pressure on cash generation.
Meta reported third-quarter revenue of $64.6 billion, up 26% year over year. Ad impressions increased 10%, while average price per ad rose 14%.
Meta spent $34.9 billion on capital expenditures during the quarter and reported negative free cash flow of $2.12 billion, its first quarterly cash burn in more than a decade.
The company is investing heavily in data centers and its Muse AI platform while also pursuing a major equity raise to fund further expansion.
Alphabet is facing similar pressure.
Google Cloud revenue surged 103% to $30.7 billion in the third quarter as demand for AI infrastructure and services accelerated.
However, Alphabet reported roughly $9.1 billion in negative free cash flow as spending on data centers, AI chips and cloud capacity increased. The company also expects capital expenditure to rise significantly again in 2027.
The results show that AI is already contributing meaningful revenue growth, but investors are increasingly focused on whether that growth can generate enough cash to support the scale of infrastructure investment required.
